View Filing Data

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
Document and Entity Information - USD ($) $ in Millions	Dec. 31, 2019	Mar. 05, 2020	Jun. 28, 2019
Document and Entity Information
Entity Registrant Name	CYCLERION THERAPEUTICS, INC.
Document Type	10-K
Document Period End Date	Dec. 31, 2019
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Public Float			$ 306.2
Entity Common Stock, Shares Outstanding		27,754,894
Entity Central Index Key	0001755237
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Amendment Flag	false

Consolidated and Combined Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 94,895
Related party accounts receivable	1,474
Prepaid expenses	1,966	$ 867
Other current assets	2,862	12
Total current assets	101,197	879
Restricted cash, net of current portion	4,991
Property and equipment, net	11,613	6,497
Operating lease right-of-use asset	68,137
Other assets	540	25
Total assets	186,478	7,401
Current liabilities:
Accounts payable	3,230	2,781
Related party accounts payable	81
Accrued research and development costs	2,198	5,261
Accrued expenses and other current liabilities	9,320	9,804
Current portion of operating lease liabilities	3,420
Total current liabilities	18,249	17,846
Operating lease liabilities, net of current portion	70,500
Commitments and contingencies
Stockholders' equity (deficit)
Common stock, no par value, 400,000,000 shares authorized and 27,598,133 issued and outstanding at December 31, 2019 and no shares issued or outstanding at December 31, 2018
Accumulated deficit	(85,627)
Net parent investment		(10,445)
Paid-in capital	183,376
Accumulated other comprehensive income (loss)	(20)
Total stockholders' equity (deficit)	97,729	(10,445)
Total liabilities and stockholders' equity (deficit)	$ 186,478	$ 7,401

Consolidated and Combined Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2019	Dec. 31, 2018
Consolidated and Combined Balance Sheets
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized	400,000,000	400,000,000
Common stock, shares issued	27,598,133	0
Common stock, shares outstanding	27,598,133	0

Consolidated and Combined Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Consolidated and Combined Statements of Operations and Comprehensive Loss
Revenue from related party	$ 4,507
Cost and expenses:
Research and development	95,140	$ 87,716
General and administrative	34,404	27,536
Total cost and expenses	129,544	115,252
Loss from operations	(125,037)	(115,252)
Interest and other income	2,029
Net loss	$ (123,008)	$ (115,252)
Net loss per share:
Basic and diluted net loss per share (in dollars per share)	$ (4.49)	$ (4.21)
Weighted average shares used in calculating:
Basic and diluted net loss per share (in shares)	27,380	27,380
Other comprehensive loss:
Net loss	$ (123,008)	$ (115,252)
Other comprehensive loss:
Foreign currency translation adjustment	(20)
Total other comprehensive loss	(20)
Comprehensive loss	$ (123,028)	$ (115,252)

Consolidated and Combined Statements of Stockholders' Equity (Deficit) - USD ($) $ in Thousands	Common stock	Net Parent Investment	Paid-in capital	Accumulated deficit	Accumulated other comprehensive loss	Total
Beginning balance at Dec. 31, 2017		$ (8,567)				$ (8,567)
Change in Stockholders' Equity (Deficit)
Net loss		(115,252)				(115,252)
Net transfers from Ironwood		100,941				100,941
Ironwood allocation - share-based compensation		12,433				12,433
Ending balance at Dec. 31, 2018		(10,445)				$ (10,445)
Ending balance (in shares) at Dec. 31, 2018						0
Change in Stockholders' Equity (Deficit)
Net loss		(37,381)		$ (85,627)		$ (123,008)
Net transfers from Ironwood		38,687				38,687
Ironwood allocation - share-based compensation		3,989				3,989
Separation-related adjustments		7,752				7,752
Reclassification of net parent company investment		$ (2,602)	$ 2,602
Distribution of common stock by Ironwood upon separation (in shares)	15,562,555
Issuance of common stock - private placement, net of fees			164,622			164,622
Issuance of common stock - private placement, net of fees (in shares)	11,817,165
Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan			510			510
Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan (in shares)	196,471
Issuance of common stock awards (in shares)	21,942
Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan			15,642			15,642
Foreign currency translation adjustment					$ (20)	(20)
Ending balance at Dec. 31, 2019			$ 183,376	$ (85,627)	$ (20)	$ 97,729
Ending balance (in shares) at Dec. 31, 2019	27,598,133					27,598,133

Consolidated and Combined Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (123,008)	$ (115,252)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Depreciation and amortization	2,700	1,528
Loss on disposal of property and equipment	751
Share-based compensation expense	19,631	12,433
Changes in operating assets and liabilities:
Related party accounts receivable	(1,474)
Prepaid expenses	(1,099)	384
Other current assets	(115)	(4)
Operating lease assets	3,129
Other assets	(515)	55
Accounts payable	(331)	979
Related party accounts payable	81
Accrued research and development costs	(3,064)	356
Operating lease liabilities	2,655
Accrued expenses and other current liabilities	(1,556)	2,018
Net cash (used in) operating activities	(102,215)	(97,503)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(6,888)	(3,438)
Proceeds from sale of property and equipment	173
Net cash (used in) investing activities	(6,715)	(3,438)
CASH FLOWS FROM FINANCING ACTIVITIES:
Gross proceeds from private placement	175,000
Costs associated with private placement	(10,378)
Proceeds from exercises of stock options and ESPP	510
Transfers from Ironwood	46,439	100,941
Net cash provided by financing activities	211,571	100,941
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(20)
Net increase in cash, cash equivalents and restricted cash	102,621
Cash, cash equivalents and restricted cash, beginning of period	0	0
Cash, cash equivalents and restricted cash, end of period	102,621	0
Non-cash investing activities
Fixed asset purchases in accounts payable and accrued expenses	$ 823	$ 455

Consolidated and Combined Statements of Cash Flows (Parenthetical) $ in Thousands	Dec. 31, 2019 USD ($)
Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated and combined balance sheets
Cash and cash equivalents	$ 94,895
Restricted cash	7,726
Total cash, cash equivalents and restricted cash	$ 102,621

Nature of Business	12 Months Ended
Nature of Business	Dec. 31, 2019
Nature of Business
Nature of Business	1. Nature of Business Nature of Operations Cyclerion Therapeutics, Inc. (“Cyclerion” or the “Company”) is a clinical-stage biopharmaceutical company harnessing the power of soluble guanylate cyclase (“sGC”) pharmacology to discover, develop and commercialize breakthrough treatments for serious and orphan diseases. Cyclerion’s focus is enabling the full therapeutic potential of next-generation sGC stimulators. The Company’s strategy rests on a solid scientific foundation that is enabled by our people and capabilities, external collaborations, and a responsive capital allocation approach. Cyclerion GmbH, a wholly owned subsidiary, was incorporated in Zug, Switzerland on May 3, 2019. Cyclerion GmbH is an operational entity with one employee who is the Company’s Chief Innovation Officer. The functional currency is the Swiss franc. The Separation On April 1, 2019, Ironwood Pharmaceuticals, Inc. (“Ironwood”) completed the previously announced separation of its sGC business, and certain other assets and liabilities, into a separate, independent publicly traded company by way of a pro-rata distribution of all of the outstanding shares of common stock of Cyclerion Therapeutics, Inc. through a dividend distribution of one share of the Company’s common stock, with no par value per share, for every 10 shares of Ironwood common stock held by Ironwood stockholders as of the close of business on March 19, 2019, the record date for the Distribution (the entire transaction being the “Separation”). As a result of the Separation, the Company became an independent public company and commenced regular way trading under the symbol “CYCN” on the Nasdaq Global Select Market on April 2, 2019. In connection with the Separation, on March 30, 2019, the Company entered into certain agreements with Ironwood to provide a framework for the Company’s relationship with Ironwood following the Separation, including, among others, the Separation Agreement, Tax Matters Agreement, and Employee Matters Agreement (“EMA”). In addition, in connection with the Separation, on April 1, 2019, the Company entered into a Development Agreement, an Ironwood Transition Services Agreement, a Cyclerion Transition Services Agreement and an Intellectual Property License Agreement with Ironwood. On April 2, 2019, the Company issued 11,817,165 shares (‘‘Private Placement Shares’’) of its common stock to accredited investors for gross proceeds of $175 million (net proceeds of approximately $165 million) pursuant to the amended and restated common stock purchase agreement, dated as of February 25, 2019, by and among the Company and the selling stockholders listed therein (the “Amended and Restated Common Stock Purchase Agreement”). The funds associated with the sale of Private Placement Shares were received by the Company on April 2, 2019. Basis of Presentation The Company did not operate as a separate, stand-alone entity for the full period covered by the annual consolidated and combined financial statements. The Company’s consolidated balance sheet as of December 31, 2019 consists of the consolidated balances of Cyclerion as prepared on a stand-alone basis. The Company’s combined balance sheet as of December 31, 2018 and consolidated and combined statements of operations and comprehensive loss for the years ended December 31, 2019 and 2018, as well as our statements of cash flows for the years ended December 31, 2019 and 2018, respectively, have been prepared on a “carve out” basis for the periods and dates prior to the Separation on April 1, 2019. The consolidated and combined financial statements reflect the historical results of the operations, financial position and cash flows of Cyclerion, in conformity with United States generally accepted accounting principles (“U.S. GAAP”). The accompanying consolidated and combined financial statements reflect the consolidated and combined financial position and consolidated and combined results of operations of the Company as an independent, publicly-traded company for the period after the Separation on April 1, 2019. The consolidated and combined financial statements also reflect the financial position and results of operations of the Company as a combined reporting entity of Ironwood for periods prior to the Separation. These consolidated and combined financial statements of Cyclerion reflect the assets, liabilities, and expenses directly attributable to Cyclerion, as well as allocations of certain corporate level assets, liabilities and expenses, deemed necessary to fairly present the financial position, results of operations and cash flows of Cyclerion, as discussed further below. As such, these allocations may not be indicative of the actual amounts that would have been recorded had Cyclerion operated as an independent, publicly traded company for the years presented. During the year ended December 31, 2019, the Company recorded approximately $7.8 million in Separation-related adjustments in its consolidated and combined statements of stockholders’ equity (deficit). The Separation-related adjustments primarily related to differences between assets and liabilities transferred to Cyclerion as a result of the Separation and assets and liabilities reported in the Company’s combined balance sheet as of March 31, 2019. Prior to the Separation, Cyclerion was dependent upon Ironwood for all of its working capital and financing requirements, as Ironwood used a centralized approach to cash management and financing its operations. There were no cash amounts specifically attributable to Cyclerion for the historical periods presented; therefore, there is no cash reflected for historical periods in the consolidated and combined financial statements. Accordingly, cash and cash equivalents, debt or related interest expense have not been allocated to Cyclerion in the historical financial statements. Financing transactions related to Cyclerion are accounted for as a component of net parent investment in the historical combined balance sheets and as a financing activity on the accompanying combined statements of cash flows. Prior to the Separation, Cyclerion’s combined financial statements included an allocation of expenses related to certain Ironwood corporate functions, including senior management, legal, human resources, finance, information technology and quality assurance. These expenses were allocated to Cyclerion based on direct usage or benefit where identifiable, with the remainder allocated pro-rata based on project related costs, headcount or other measures. These allocations may not be indicative of the actual expense that would have been incurred had Cyclerion operated as an independent, publicly traded company for the periods presented. Prior to the Separation, the combined balance sheets of Cyclerion included assets and liabilities that were allocated principally on a specific identification basis and net parent investment was shown in lieu of stockholders’ equity. As a result of the Separation, the Company’s net parent investment balance was reclassified to paid-in capital. Going Concern At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company’s evaluation entails analyzing prospective operating budgets and forecasts for expectations of the Company’s cash needs and comparing those needs to the current cash and cash equivalent balances. The Company is required to make certain additional disclosures if it concludes substantial doubt exists and it is not alleviated by the Company’s plans or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern. The Company has experienced negative operating cash flows for all historical periods presented and it expects these losses to continue into the foreseeable future as the Company continues the development and clinical testing of the product candidates, olinciguat and IW‑6463, and its discovery research programs, as well as the close-out of the recently completed praliciguat studies. On April 2, 2019, the Company issued the Private Placement Shares to accredited investors for gross proceeds of $175 million (net proceeds of approximately $165 million) pursuant to the Amended and Restated Common Stock Purchase Agreement. The funds associated with the sale of Private Placement Shares were received by the Company on April 2, 2019. After considering the Company’s current research and development plans and the timing expectations related to the progress of its programs, and after considering its existing cash and cash equivalents as of December 31, 2019, the Company did not identify conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date these financial statements were issued.

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2019

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated and combined financial statements include the accounts of Cyclerion Therapeutics, Inc. and its wholly owned subsidiaries, Cyclerion GmbH and Cyclerion Securities Corporation. All intercompany transactions and balances are eliminated in consolidation.

Segment Information

Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the Company’s chief operating decision-maker in deciding how to allocate resources and in assessing performance. The Company currently operates in one reportable business segment—human therapeutics.

Use of Estimates

The preparation of consolidated and combined financial statements in accordance with U.S. GAAP requires the Company’s management to make estimates and judgments that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated and combined financial statements, and the amounts of expenses during the reported periods. On an ongoing basis, the Company’s management evaluates its estimates, judgments and methodologies. Significant estimates and assumptions in the consolidated and combined financial statements include those related to allocations of expenses, assets and liabilities from Ironwood’s historical financial statements for the periods prior to the Separation, impairment of long-lived assets, income taxes, including the valuation allowance for deferred tax assets, research and development expenses, contingencies and share-based compensation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from these estimates under different assumptions or conditions. Changes in estimates are reflected in reported results in the period in which they become known.

Cash and Cash Equivalents

The Company considers all highly liquid investment instruments with a remaining maturity when purchased of three months or less to be cash equivalents. Investments qualifying as cash equivalents may consist of money market funds and overnight repurchase agreements. The carrying amount of cash equivalents approximates fair value. There were no cash amounts specifically attributable to Cyclerion for the historical periods presented; therefore, there is no cash reflected in the combined financial statements.

Restricted Cash

The Company is contingently liable under an unused letter of credit with a bank, related to the Company’s facility lease, in the amount of approximately $7.7 million as of December 31, 2019. The Company records as restricted cash the collateral used to secure the letter of credit. The amount of restricted cash in current assets and non-current assets was approximately $2.7 million and $5.0 million at December 31, 2019, respectively. See Note 14, Subsequent Events.

Property and Equipment

Property and equipment, including leasehold improvements, are recorded at cost, and are depreciated when placed into service using the straight-line method based on their estimated useful lives as follows:


		Estimated
		Useful Life
Asset Description		(In Years)
Laboratory equipment		5
Computer and office equipment		3
Furniture and fixtures		7
Software		3

Included in property and equipment are certain costs of software obtained for internal use. Costs incurred during the preliminary project stage are expensed as incurred, while costs incurred during the application development stage are capitalized and amortized over the estimated useful life of the software. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Maintenance and training costs related to software obtained for internal use are expensed as incurred.

Costs for capital assets not yet placed into service have been capitalized as construction in progress and are depreciated in accordance with the above guidelines once placed into service. Maintenance and repair costs are expensed as incurred.

Leasehold improvements are amortized over the shorter of the estimated useful life of the asset or the lease term. The Company has no capital leases.

Fair Value of Investment Instruments

Fair value is defined 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. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Foreign Currency Translation Adjustment

The functional currency of the Company’s foreign subsidiary is its local currency, the Swiss franc. The assets and liabilities of the Company’s foreign subsidiary are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at the average exchange rates prevailing during the period. The cumulative translation effect for the Company’s foreign subsidiary is included as a foreign currency translation adjustment in the consolidated and combined statements of stockholders’ equity (deficit) and as a component of comprehensive loss in the consolidated and combined statements of operations and comprehensive loss.

The Company’s intercompany accounts are typically denominated in the functional currency of the foreign subsidiary. Gains and losses resulting from the remeasurement of intercompany balances are recorded in the consolidated statements of operations.

Related Party Accounts Receivable

The Company makes judgments as to its ability to collect outstanding receivables and provides an allowance for receivables when collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding invoices. The Company’s receivables primarily relate to amounts earned under a Development Agreement with Ironwood. The Company believes that credit risks associated with Ironwood are not significant. To date, the Company has not had significant write-offs of bad debt and the Company did not have an allowance for doubtful accounts as of December 31, 2019.

Impairment of Long-Lived Asset

The Company regularly reviews the carrying amount of its long-lived assets to determine whether indicators of impairment may exist, which warrant adjustments to carrying values or estimated useful lives. If indications of impairment exist, projected future undiscounted cash flows associated with the asset are compared to the carrying amount to determine whether the asset’s value is recoverable. If the carrying value of the asset exceeds such projected undiscounted cash flows, the asset will be written down to its estimated fair value. There were no significant impairments of long-lived assets for the years ended December 31, 2019 and 2018.

Leases

Effective January 1, 2019, the Company adopted Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”) using the optional transition method. The adoption of ASC 842 represents a change in accounting principle that aims to increase transparency and comparability among organizations by requiring the recognition of right-of-use assets and lease liabilities on the balance sheet for both operating and finance leases. In addition, the standard requires enhanced disclosures that meet the objective of enabling financial statement users to assess the amount, timing, and uncertainty of cash flows arising from leases. The reported results for the year ended December 31, 2019 reflect the application of ASC 842 guidance, while the reported results for prior periods were prepared in conjunction with ASC 840, Leases (“ASC 840”).

The recognition of right-of-use (“ROU”) assets and lease liabilities related to the Company’s operating leases under ASC 842 has had a material impact on the Company’s consolidated and combined financial statements.

As part of the ASC 842 adoption, the Company has used certain practical expedients outlined in the guidance. These practical expedients include:

Account policy election to use the short-term lease exception by asset class;

Election of the practical expedient package during transition, which includes:

An entity need not reassess whether any expired or existing contracts are or contain leases.

An entity need not reassess the classification for any expired or existing leases. As a result, all leases that were classified as operating leases in accordance with ASC 840 are classified as operating leases under ASC 842, and all leases that were classified as capital leases in accordance with ASC 840 are classified as finance leases under ASC 842.

An entity need not reassess initial direct costs for any existing leases.

The Company’s lease portfolio includes a property lease for its headquarters location at 301 Binney Street, Cambridge, MA (the “Master Lease”). The Company determines if an arrangement is a lease at the inception of the contract. The asset component of the Company’s operating leases is recorded as operating lease right-of-use assets, and the liability component is recorded as current portion of operating lease liabilities and operating lease liabilities, net of current portion, in the Company’s consolidated balance sheets.

ROU assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at the commencement date. The Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments if an implicit rate of return is not provided with the lease contract. Operating lease right-of-use assets are adjusted for incentives received.

Lease cost is recognized on a straight-line basis over the lease term, and includes amounts related to short-term leases. Variable lease costs that do not depend on an index or rate are recognized as incurred.

On October 18, 2019, the Company entered into an agreement to sublease 15,700 rentable square feet of its Master Lease to a subtenant. Sublease income is recognized on straight-line basis over the term of the sublease agreement and is recorded net of the related rent expense from the Master Lease within interest and other income in the consolidated and combined statements of operations and comprehensive loss. In sublease agreements that contain non-monetary consideration, the Company estimates the fair market value of the non-monetary consideration received using market data and recognizes it on a straight-line basis over the sublease term. Variable lease consideration that does not depend on an index or rate is allocated to a non-lease component and is recognized over time in accordance with the pattern of transfer.

ROU assets and operating lease liabilities are remeasured upon certain modifications to leases using the present value of remaining lease payments and estimated incremental borrowing rate upon lease modification. The Company reviews any changes to its lease agreements for potential modifications and/or indicators of impairment of the respective ROU asset. No modification or impairment was deemed to have occurred by entering into the sublease agreement because the Company was not released, either fully or in part, from its obligations under the Master Lease. See Note 8, Leases and Note 14, Subsequent Events.

Revenue

Upon executing a revenue generating arrangement, the Company assesses whether it is probable the Company will collect consideration in exchange for the good or service it transfers to the customer. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), it performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies the performance obligations. The Company must develop assumptions that require significant judgment to determine the stand-alone selling price for each performance obligation identified in the contract. The assumptions that are used to determine the stand-alone selling price may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.

The Company generates revenue from a Development Agreement with Ironwood, pursuant to which the Company provides certain research and development services with respect to certain of Ironwood’s products and product candidates. Such research and development activities are governed by a joint steering committee composed of representatives of both companies. Services performed are invoiced at a mutually agreed upon rate and the initial term of the agreement is two years from the date of Separation and automatically renews for one year unless either party notifies the other at least six months prior to the expiration.

Research and Development Costs

The Company expenses research and development costs to operations as incurred. The Company defers and capitalizes nonrefundable advance payments made by the Company for research and development activities until the related goods are received or the related services are performed.

Research and development expenses are comprised of costs incurred in performing research and development activities, which may include salary, benefits and other employee-related expenses; share-based compensation expense; laboratory supplies and other direct expenses; facilities expenses; overhead expenses; third-party contractual costs relating to nonclinical studies and clinical trial activities and related contract manufacturing expenses, development of manufacturing processes and regulatory registration of third-party manufacturing facilities; and other outside expenses.

General and Administrative Expenses

The Company expenses general and administrative costs to operations as incurred. General and administrative expense consists of compensation, share-based compensation, benefits and other employee-related expenses for personnel in the Company’s administrative, finance, legal, information technology, business development and human resource functions. Other costs include the legal costs of pursuing patent protection of the Company’s intellectual property, general and administrative related facility costs, insurance costs and professional fees for accounting and legal services.

Income taxes

For periods prior to the Separation, income taxes as presented herein include current and deferred income taxes of Ironwood allocated to the Company’s standalone financial statements in a manner that is systematic, rational and consistent with the asset and liability method prescribed by the ASC Topic 740, Income Taxes ("Topic 740"). Accordingly, the Company’s income tax provision for those periods was prepared following the "Separate Return Method." The Separate Return Method applies Topic 740 to the standalone financial statements of each member of the consolidated group as if the group member were a separate taxpayer and a standalone enterprise. As a result, actual tax transactions included in the consolidated financial statements of Ironwood may not be included in the combined financial statements of Cyclerion. Similarly, the tax treatment of certain items reflected in the combined financial statements of Cyclerion may not be reflected in the consolidated financial statements and tax returns of Ironwood; therefore, items such as net operating losses, credit carryforwards and valuation allowances may exist in the standalone financial statements that may or may not exist in Ironwood’s consolidated financial statements.

Cyclerion provides for income taxes under the asset and liability method. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates in effect when the differences are expected to reverse. Net deferred tax assets are reduced by a valuation allowance to reflect the uncertainty associated with their ultimate realization.

Cyclerion accounts for uncertain tax positions recognized in the combined financial statements in accordance with the provisions of Topic 740 by prescribing a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. When uncertain tax positions exist, Cyclerion recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. 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. It does not consider the likelihood of whether or not the IRS will review the position. Cyclerion evaluates uncertain tax positions on a quarterly basis and adjusts the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions. Any changes to these estimates, based on the actual results obtained and/or a change in assumptions, could affect Cyclerion’s income tax provision in future periods. Interest and penalty charges, if any, related to unrecognized tax benefits would be classified as a provision for income tax in Cyclerion’s combined statement of operations.

In general, the taxable loss of Cyclerion was included in Ironwood's U.S. consolidated and combined income tax returns, where applicable. As such, separate income tax returns were not prepared for Cyclerion prior to the Separation. Consequently, if applicable, income taxes currently payable were deemed to have been remitted to Ironwood in the period the liability arose and income taxes currently receivable were deemed to have been received from Ironwood in the period that a refund could have been recognized by Cyclerion, had Cyclerion been a separate taxpayer. In accordance with the tax matters agreement with Ironwood, Cyclerion is responsible for its own portion of income taxes beginning after the Separation date.

Patent Costs

The Company incurred and recorded as operating expense legal and other fees related to patents of approximately $0.8 million and $0.9 million for the years ended December 31, 2019 and 2018, respectively. These costs were charged to general and administrative expenses as incurred.

Interest and Other Income

For the year ended December 31, 2019, interest and other income consisted of $1.9 million of interest income related to interest generated from our cash and cash equivalents balances and $0.1 million of net sublease income.

Subsequent Events

The Company considers events or transactions that have occurred after the balance sheet date of December 31, 2019, but prior to the filing of the financial statements with the Securities and Exchange Commission, to provide additional evidence relative to certain estimates or to identify matters that require additional recognition or disclosure. Subsequent events have been evaluated through the filing of the financial statements accompanying this Annual Report on Form 10‑K. See Note 14, Subsequent Events.

New Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. Except as discussed elsewhere in the notes to the consolidated and combined financial statements, the Company did not adopt any new accounting pronouncements during the years ended December 31, 2019 and 2018, that had a material effect on its consolidated and combined financial statements.

In February 2016, the FASB issued ASU No. 2016‑02, Leases (“ASU 2016‑02”), which supersedes the lease accounting requirements in ASC Topic 840, Leases, and most industry-specific guidance with ASC Topic 842, Leases. ASU 2016‑02 requires the identification of arrangements that should be accounted for as leases by lessees. In general, for lease arrangements exceeding a 12‑month term, these arrangements must now be recognized as assets and liabilities on the balance sheet of the lessee. Under ASU 2016‑02, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing, while the income statement will reflect lease expense for operating leases and amortization and interest expense for financing leases. The balance sheet amount recorded for existing leases at the date of adoption of ASU 2016‑02 must be calculated using the applicable incremental borrowing rate at the date of adoption. ASU 2016‑02 is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. In July 2018, the FASB issued ASU No. 2018‑10, Leases (Topic 842) (“ASU 2018‑10”), Codification Improvements and ASU No. 2018‑11, Leases (Topic 842) (“ASU 2018‑11”), to provide additional guidance for the adoption of Topic 842. ASU 2018‑10 clarifies certain provisions, and corrects unintended applications of the guidance, such as the rate implicit in a lease, impairment of the net investment in a lease, lessee reassessment of lease classifications, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments. The amendments in ASU 2018‑11 will allow for an additional transition method, whereby at the adoption date the entity recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, while the comparative period disclosures continue recognition under ASC Topic 840. Additionally, ASU 2018‑11 includes a practical expedient for separating contract components for lessors. In December 2018, the FASB issued ASU No. 2018‑20, Leases (Topic 842) (“ASU 2018‑20”), Narrow-Scope Improvements for Lessors, which provided clarification for lessors on how to apply the new leases standard when accounting for sales taxes, certain lessor costs, and certain requirements related to variable payments in contracts. In March 2019, the FASB issued ASU No. 2019‑01, Leases (Topic 842) (“ASU 2019‑01”), Codification Improvements, which aligned the new leases guidance with existing guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers. It also clarified an exemption for lessors and lessees from a certain interim disclosure requirement associated with adopting the board’s new lease accounting standard. The Company’s analysis includes, but is not limited to, reviewing existing leases, reviewing other service agreements for embedded leases, establishing policies and procedures, assessing potential disclosures and evaluating the impact of adoption on the Company’s consolidated and combined financial statements. The Company adopted ASU 2016‑02, ASU 2018‑10, ASU 2018‑11, ASU 2018‑20, and ASU 2019‑01 in the first quarter of 2019.

In June 2016, the FASB issued ASU No. 2016‑13, Measurement of Credit Losses on Financial Instruments (“ASU 2016‑13”). ASU 2016‑13 will change how companies account for credit losses for most financial assets and certain other instruments. For trade receivables, loans and held-to-maturity debt securities, companies will be required to recognize an allowance for credit losses rather than reducing the carrying value of the asset. Subsequent to the issuance of ASU 2016‑13, the FASB issued ASU No. 2019‑04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (“ASU 2019‑04”), ASU No. 2019‑05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (“ASU 2019‑05”) to provide additional guidance on the adoption of ASU 2016‑13, ASU No. 2019‑10, Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) (“ASU 2019‑10”) and ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses (“ASU 2019-11”). ASU 2019‑04 added Topic 326, Financial Instruments—Credit Losses, and made several amendments to the codification and also modified the accounting for available-for-sale debt securities. ASU 2019‑05 provides targeted transition relief by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. ASU 2019‑10 aligned the effective dates of certain major updates not yet effective to conform to the FASB’s new philosophy of staggering major updates between large public companies and all other entities. ASU 2019-11’s major provisions included additional clarifications and practical expedients related to expected recoveries for purchased assets with credit deterioration, troubled debt restructuring, accrued interest receivables, and other areas when adopting ASU 2016- 13. ASU 2016‑13, ASU 2019‑04 and ASU 2019‑05 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the potential impact that the adoption of these ASUs will have on the Company’s financial position and results of operations.

In October 2016, the FASB issued ASU No. 2016‑16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory (“ASU 2016‑16”). ASU 2016‑16 eliminates the ability to defer the tax expense related to intra-entity asset transfers other than inventory. Under the new standard, entities should recognize the income tax consequences on an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016‑16 is effective for fiscal periods beginning after December 15, 2018. The Company adopted this standard during the first quarter of 2019. Adoption of this standard did not have a material impact on the Company’s financial position or results of operations.

In June 2018, the FASB issued ASU No. 2018‑07, Improvements to Nonemployee Share-based Payments (“ASU 2018‑07”). ASU 2018‑07 simplifies the accounting for share-based payments to nonemployees by aligning with the accounting for share-based payments to employees, with certain exceptions. Measurement of equity-classified nonemployee awards issued in exchange for goods or services used or consumed in an entity’s own operations will be fixed at the grant date, which may lower the cost and reduce volatility in the income statement. Entities also may use the expected term to measure nonemployee options or elect to use the contractual term as the expected term, on an award-by-award basis. ASU 2018‑07 is effective for the fiscal periods beginning after December 15, 2018. The Company adopted this standard during the first quarter of 2019. Adoption of this standard did not have a material impact on the Company’s financial position or results of operations.

In August 2018, the FASB issued ASU No. 2018‑13, Fair Value Measurement (“ASU 2018‑13”): Disclosure Framework—Changes to the Disclosure Requirement for Fair Value Measurement (“ASU 2018‑13”) which amends the disclosure requirements for fair value measurements. The amendments in ASU 2018‑13 are effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the potential impact of ASU 2018‑13, but does not expect that the adoption of this guidance will have a significant impact on the Company’s financial position and results of operations.

In August 2018, the FASB issued ASU No. 2018‑15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (“ASU 2018‑15”). ASU 2018‑15 requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350‑40, Intangibles—Goodwill and Other—Internal Use Software (ASC 350‑40), to determine which implementation costs to capitalize as assets or expense as incurred. The internal-use software guidance in ASC 350‑40 requires that certain costs incurred during the application development stage be capitalized and other costs incurred during the preliminary project and post-implementation stages be expensed as they are incurred. A customer’s accounting for the hosting component of the arrangement is not affected by this guidance. The amendments in ASU 2018‑15 are effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the potential impact that the adoption of ASU 2018‑15 may have on the Company’s financial position on a prospective basis, but does not expect that the adoption of this guidance will have a significant impact on the Company's financial position and results of operations.

No other accounting standards known by the Company to be applicable to it that have been issued by the FASB or other standard-setting bodies and that do not require adoption until a future date are expected to have a material impact on the Company’s consolidated and combined financial statements upon adoption.

Related Party Transactions	12 Months Ended
Related Party Transactions	Dec. 31, 2019
Related Party Transactions
Related Party Transactions	3. Related Party Transactions Relationship with Ironwood Ironwood became a related party when Mark Currie, Ironwood’s former Chief Scientific Officer and the Company’s President, joined Ironwood’s board in April 2019 following the Separation. Prior to April 1, 2019, the Company was managed and operated in the normal course of business under Ironwood. Accordingly, certain shared costs were allocated to the Company and reflected as expenses in the Company’s stand-alone combined financial statements. The expenses reflected in the combined financial statements may not be indicative of expenses that will be incurred by the Company in the future. (a) Corporate costs Ironwood incurred significant corporate costs for services provided to Cyclerion. These costs included expenses for information systems, accounting, other financial services (such as treasury, audit and purchasing), human resources, legal, facilities and Separation-related costs. A portion of these costs benefited Cyclerion and have been allocated to Cyclerion using a pro-rata method based on project related costs, headcount, or other measures that management believes are consistent and reasonable. This methodology is applied consistently between periods, however the magnitude of the allocation will vary based on the relationship of Cyclerion costs compared to those of Ironwood’s other operations. The corporate costs allocated to Cyclerion, prior to the Separation, and included in the combined statements of operations were approximately $6.8 million for the three months ended March 31, 2019 and $18.3 million for the year ended December 31, 2018, and were included in general and administrative expenses for both periods. (b) Cash Management and Financing Cyclerion participated in Ironwood’s centralized cash management and financing programs prior to the Separation. Disbursements were made through centralized accounts payable systems operated by Ironwood. Cash receipts were transferred to centralized accounts, also maintained by Ironwood. As cash is disbursed and received by Ironwood, it was accounted for by Cyclerion through net parent investment. All obligations were financed by Ironwood and financing decisions were determined by central Ironwood treasury operations until the Separation. Other Transactions with Ironwood As part of the Separation from Ironwood, the Company entered into Transition Services Agreements and a Development Agreement with Ironwood. Under the Transition Services Agreements, the Company provides certain services to Ironwood, and Ironwood provides certain services to the Company, each related to corporate functions such as finance, procurement, facilities and development for a period of up to two years from the date of the Separation, unless earlier terminated or extended by mutual agreement. These services are charged to and from Ironwood and are recorded as part of operating expenses. The Company recorded a net charge to operating expenses of approximately $0.2 million for activities related to the transition services agreements for the nine months ended December 31, 2019. Under the Development Agreement, the Company provides certain research and development services to Ironwood at mutually agreed upon rates and the amounts earned are recorded as revenue from related party. Such research and development activities are governed by a joint steering committee composed of representatives of both Ironwood and the Company. The Company recorded approximately $4.5 million in revenue from related party for services provided under the Development Agreement for the nine months ended December 31, 2019. In accordance with the Separation Agreement, there were certain other transactions and adjustments post-Separation between the Company and Ironwood. The total amount due from Ironwood at December 31, 2019 was approximately $1.5 million, primarily from the Development Agreement, and is reflected as related party accounts receivable. The total amount due to Ironwood at December 31, 2019 was approximately $0.1 million. During the year ended December 31, 2019, Cyclerion paid Ironwood approximately $1.3 million associated with tenant improvement reimbursement provisions in accordance with the Separation Agreement. Ironwood has obtained health insurance services for its employees, including employees of Ironwood who became employees of Cyclerion, from an insurance provider whose President and Chief Executive Officer became a member of Ironwood’s board in April 2016. Prior to the Separation, expenses related to insurance premiums were allocated to Cyclerion using a pro-rata method based on internal project assignments and headcount, that management believes are consistent and reasonable. Insurance premiums allocated to Cyclerion prior to the Separation amounted to approximately $0.5 million for the year ended December 31, 2019 and $2.1 million for the period ended December 31, 2018, respectively, and is reflected in the Company’s consolidated and combined statements of operations. Accordingly, the amounts presented are not necessarily indicative of future expense and do not necessarily reflect the results that Cyclerion would have experienced as an independent company for the periods presented. Peter Hecht, Ironwood’s former Chief Executive Officer and the Chief Executive Officer and board member of Cyclerion, donated 2.5 million of his shares of Ironwood common stock to American Endowment Foundation for the creation of a donor advised fund that divested these shares to invest $34.0 million in Cyclerion as part of the financing transaction completed by Cyclerion on April 2, 2019. Mark Currie has invested $4.0 million in Cyclerion as part of this financing. Dr. Currie and certain other investors have funded a portion of their investment through sales of Ironwood common stock. Other Related Party Transactions During the year ended December 31, 2019, the Company paid approximately $0.2 million to a related party which it engaged to provide research and development transaction support services. The entity became a related party when Mark Currie, the Company’s President, joined its board in January 2020. There was a de minimis amount due to the related party at December 31, 2019. There were no amounts recorded in 2018.

Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2019

Fair Value of Financial Instruments

Fair Value of Financial Instruments

4. Fair Value of Financial Instruments

The Company’s cash equivalents are generally classified within Level 1 of the fair value hierarchy. The following tables presents information about the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2019 and indicate the level of the fair value hierarchy used to determine such fair values (in thousands):


	Fair Value Measurements as of
	December 31, 2019 Using:
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	93,859	$	—	$	—	$	93,859
Cash equivalents	$	93,859	$	—	$	—	$	93,859

The Company had no financial assets measured at fair value as of December 31, 2018.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Property and Equipment

12 Months Ended

Dec. 31, 2019

Property and Equipment

Property and Equipment

5. Property and Equipment

Property and equipment, net consisted of the following (in thousands):


	December 31,
	2019		2018
Laboratory equipment	$	14,505	$	17,753
Software		2,232		2,593
Construction in progress		915		741
Computer and office equipment		1,890		901
Leasehold improvements		13,673		—
Property and equipment, gross		33,215		21,988
Less: accumulated depreciation and amortization		(21,602)		(15,491)
Property and equipment, net	$	11,613	$	6,497

As of December 31, 2019, and 2018, the Company’s property and equipment was primarily located in Cambridge, Massachusetts.

Depreciation and amortization expense of the Company’s property and equipment was approximately $2.7 million and $1.5 million for the years ended December 31, 2019 and 2018, respectively. The Company had a disposal loss of $0.8 million of property and equipment, net for the year ended December 31, 2019, primarily related to leasehold improvements, recognized within operating expenses in the consolidated and combined statements of operations and comprehensive loss. Fixed asset purchases included in accounts payable and accrued expenses was approximately $0.8 million and $0.5 million at December 31, 2019 and 2018, respectively.

Accrued Expenses and Other Current Liabilities

12 Months Ended

Dec. 31, 2019

Accrued Expenses and Other Current Liabilities

Accrued Expenses and Other Current Liabilities

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):


	December 31,
	2019		2018
Accrued incentive compensation	$	3,767	$	4,889
Salaries		1,730		1,513
Accrued vacation		969		1,048
Professional fees		441		1,019
Accrued severance and benefit costs		2,009		565
Other		404		770
	$	9,320	$	9,804

Commitments and Contingencies	12 Months Ended
Commitments and Contingencies	Dec. 31, 2019
Commitments and Contingencies
Commitments and Contingencies	7. Commitments and Contingencies Other Funding Commitments As of December 31, 2019 and 2018, the Company has several on-going studies in various clinical trial stages. The Company’s most significant clinical trial expenditures are related to contract research organizations. These contracts are generally cancellable, with notice, at the Company’s option and do not have any significant cancellation penalties. Guarantees On September 6, 2018, Cyclerion was incorporated in Massachusetts and its officers and directors are indemnified for certain events or occurrences while they are serving in such capacity. Prior to the Separation, the Company’s officers and directors were similarly indemnified under Delaware law. The Company enters into certain agreements with other parties in the ordinary course of business that contain indemnification provisions. These typically include agreements with directors and officers, business partners, contractors, clinical sites and customers. Under these provisions, the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of the Company’s activities. These indemnification provisions generally survive termination of the underlying agreements. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is unlimited. However, to date the Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. As a result, the estimated fair value of these obligations is minimal. Accordingly, the Company did not have any liabilities recorded for these obligations as of December 31, 2019 or December 31, 2018.

Leases

12 Months Ended

Dec. 31, 2019

Leases

Leases

8. Leases

The FASB issued ASU 2016‑02, or the leasing standard or ASC 842, in February 2016. ASU 2016‑02 requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. ASU 2016‑02 also requires certain qualitative and quantitative disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases.

On April 1, 2019, the Company entered into the Master Lease, a direct operating lease for its existing premises located at 301 Binney Street, Cambridge, MA consisting of approximately 114,000 rentable square feet of office and lab space on the first and second floors. The Master Lease is for a term of 123 months with two five-year extension options and certain expansion rights. The Master Lease includes a letter of credit of $7.7 million posted with the landlord as a security deposit, which is collateralized by a money market account recorded as restricted cash on the Company’s consolidated balance sheet as of December 31, 2019. Cyclerion has also entered into customary non-disturbance arrangements with the building landlord’s mortgagee and with the property ground lessor recognizing Cyclerion’s leasehold interest in this property.

The Master Lease provides for annual base rent of approximately $11.0 million in the first year, which increases on a yearly basis by 3.0% (subject to an abatement of base rent of approximately $2.7 million in the first year of the lease). The Company is obligated to pay the landlord for certain costs, taxes and operating expenses related to the premises, subject to certain exclusions; however, the Company has concluded that these payments are not in-substance fixed payments and therefore are not included in the calculation of the related lease liability and asset under ASC 842. Additionally, the Company has made the policy election to adopt the practical expedient to not separate lease components from non-lease components for the right-to-use asset class of office and laboratory space. This policy election results in the Company accounting for the lease component, the use of the premises, and the non-lease components, which include a property management fee, as a single lease component.

The Company recorded the liability associated with the Master Lease at the present value of the lease payments not yet paid, discounted using the discount rate for the Master Lease established at the commencement date. As the Master Lease does not provide an implicit rate, the Company had to estimate the incremental borrowing rate, or IBR, as of the commencement date. The IBR is defined under ASC 842 as the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment. The Company determined its IBR to be 10.9%, which was used to discount the remaining lease payments over the remaining lease term and recorded a lease liability of $71.3 million on April 1, 2019. This lease liability will be amortized over the remaining lease term in an amount equal to the difference between the cash rent paid and the monthly interest calculated on the remaining lease liability. As of December 31, 2019, the Company had a current lease liability of $3.4 million and a noncurrent lease liability of $70.5 million recorded in its consolidated balance sheets related to the Master Lease.

The Company has a tenant improvement allowance from the landlord of approximately $2.3 million for certain permitted costs related to the buildout of the premises. The Company is deemed to be the owner of these tenant improvements during the lease term. These $2.3 million of improvements are included in the Company’s property, plant and equipment balances in its consolidated balance sheets as of December 31, 2019 and are depreciated over the shorter of their useful life or the related lease term. The Company received the payment for the tenant allowance in the third quarter of 2019.

On April 1, 2019, the Company recorded a right-of-use asset in the amount $71.3 million. The right-of-use asset is being amortized over the remaining lease term in an amount equal to the difference between the calculated straight-line expense of the total lease payments less the monthly interest calculated on the remaining lease liability. As of December 31, 2019, the Company had a long-term lease asset of $68.1 million recorded in its consolidated balance sheets related to the Master Lease.

Lease cost is recognized on a straight-line basis over the lease term. For the nine months ended December 31, 2019, the Company recognized a total of approximately $9.3 million of total lease costs. Variable lease costs not subject to an index or rate are recognized as incurred. For the nine months ended December 31, 2019, the Company recognized a total of approximately $1.8 million of variable lease costs related to the Master Lease.

Supplemental cash flow information related to leases for the periods reported is as follows:


	Year Ended
	December 31,
	2019
Right-of-use assets obtained in exchange for new operating lease upon lease commencement (in thousands)	$	71,266
Cash paid for amounts included in the measurement of lease liabilities (in thousands)	$	3,288
Cash received for tenant improvements included in the measurement of lease liabilities (in thousands)	$	2,289
Weighted-average remaining lease term of operating leases (in years)		9.5
Weighted-average discount rate of operating leases		10.9	%

Future minimum lease payments under non-cancelable operating leases under ASC 842 as of December 31, 2019 are as follows (in thousands):


	Operating Lease
	Payments
2020	$	11,212
2021		11,537
2022		11,872
2023		12,217
2024		12,573
2025 and thereafter		61,274
Total future minimum lease payments		120,685
Less: present value adjustment		46,765
Operating lease liabilities at December 31, 2019		73,920
Less: current portion of operating lease liabilities		3,420
Operating lease liabilities, net of current portion	$	70,500

On March 31, 2019, the Company entered into a short-term sublease of approximately 24,000 rentable square feet with Ironwood to provide temporary working space for a portion of its workforce while the buildout of the Company’s new premises was being completed. The sublease was for an initial one-month term with several one-month extension options. The Company subleased the space for approximately 1.5 months, vacating the space and terminating the sublease in mid-May 2019. The Company incurred approximately $0.2 million in rent expense related to the sublease, which is included in the total lease cost of $9.3 million, for the nine months ended December 31, 2019.

On October 18, 2019, the Company entered into an agreement with a third party to sublease 15,700 rentable square feet of its current lease premises under the Master Lease. The sublease will expire on June 30, 2029, unless earlier terminated in accordance with the sublease agreement, and has no extension options. The sublease provides for annual base rent of approximately $1.5 million in the first year, which increases on a yearly basis by 3.0% (subject to an abatement of base rent of approximately $0.7 million for the first six months of the sublease). The sublessee is responsible for its pro rata share of certain costs, taxes and operating expenses related to the subleased space, the consideration for which is variable and is based on the actual operating costs of the lessor. The variable consideration relates exclusively to nonlease components representing such services and will be recognized as incurred. The sublease includes an initial security deposit of $0.5 million, which was provided by the sublessee in the form of a letter of credit, and an additional security deposit of $0.4 million within nine months of the sublease commencement.

As part of the consideration for the sublease, the sublessee will provide licensed rooms within the sublease premises and licensed services to the Company over the sublease term free of charge. The licensed rooms have been excluded from the measurement of the sublease as control of the rooms reverts to the Company. The Company expects to receive the benefit of the licensed rooms and services beginning in late 2020. The Company estimated the fair value of the services to be approximately $4.2 million, which will be recorded on a gross basis as the services are received as a component of research and development costs in the consolidated and combined statements of operations and comprehensive loss.

The Company allocated the consideration in the sublease agreement between the lease and nonlease components based on their relative standalone prices. Gross sublease income of $0.4 million was recorded net of the related rent expense from the Master Lease. Net sublease income of approximately $0.1 million was recorded in interest and other income in the consolidated and combined statements of operations and comprehensive loss for the year ended December 31, 2019.

The total future minimum lease payments to be received under the sublease agreement as of December 31, 2019 are as follows:


	Total
	Sublease
	Payments
2020	$	1,009
2021		1,636
2022		1,683
2023		1,733
2024		1,783
2025 and thereafter		8,693
Total future minimum lease payments	$	16,537

At December 31, 2018, no leases were directly attributed to Cyclerion.

On February 28, 2020 we entered into an amendment to our Master Lease at 301 Binney Street in Cambridge, Massachusetts. The amendment provided for the partial termination of the Company's obligations with respect to a portion of the leased premises of approximately 40,000 rentable square feet. See Note 14, Subsequent Events for additional information.

Share-based Compensation Plans

12 Months Ended

Dec. 31, 2019

Share-based Compensation Plans

Share-based Compensation Plans

9. Share-based Compensation Plans

Prior to the Separation, share-based compensation expense was allocated to Cyclerion using a combined specific identification and pro-rata method based on internal project related costs and headcount that management believed were consistent and reasonable.

In connection with the Separation, Cyclerion adopted its own share-based compensation plans. Specifically, Cyclerion adopted the 2019 Employee Stock Purchase Plan (“2019 ESPP”) and the 2019 Equity Incentive Plan (“2019 Equity Plan”). Under the 2019 ESPP, eligible employees may use payroll deductions to purchase shares of stock in offerings under the plan, and thereby acquire an interest in the future of the Company. Under the 2019 Equity Plan, new post-Separation awards, including stock options and restricted stock units (“RSUs”), may be granted to employees of the Company.

Cyclerion also mirrored two of Ironwood’s existing plans, the Amended and Restated 2005 Stock Incentive Plan (“2005 Equity Plan”) and the Amended and Restated 2010 Employee, Director and Consultant Equity Incentive Plan (“2010 Equity Plan). These mirror plans were adopted to facilitate the exchange of Ironwood equity awards for Cyclerion equity awards upon the Separation as part of the equity conversion. As a result of the Separation and in accordance with the EMA, employees of both companies retained their existing Ironwood vested options and received a pro-rata share of Cyclerion options, regardless of which company employed them post-Separation. For employees that were ultimately employed by Cyclerion, unvested Ironwood options and RSUs were converted to unvested Cyclerion options and RSUs.

The conversion of equity awards resulting from the Separation impacted approximately 143 employees and was treated as a Type 1 modification under ASC Topic 718, Share Based Payments, as the awards are expected to vest under the original terms. Incremental compensation expense was measured as the excess, if any, of the fair value of the modified award over the fair value of the original award immediately before its terms were modified. The fair value of RSUs and restricted stock awards was measured using the fair value stock price immediately before and immediately after the modification date which resulted in no incremental compensation expense. The fair value of stock options was measured using the Black-Scholes option pricing method using the appropriate valuation assumptions immediately before and immediately after the modification date. As a result of the modification, Cyclerion recognized a one-time incremental expense of approximately $0.3 million for the vested stock options and will recognize an incremental expense of approximately $7.5 million for the unvested stock options over their remaining vesting period.

The following table provides share-based compensation reflected in the Company’s consolidated and combined statements of operations and comprehensive loss for the years ended December 31, 2019 and 2018 (in thousands):


	Years Ended December 31,
	2019		2018
Research and development	$	8,729	$	7,093
General and administrative		10,901		5,340
	$	19,630	$	12,433

Stock Options

Stock options granted under the Company’s equity plans generally have a ten-year term and vest over a period of four years, provided the individual continues to serve at the Company through the vesting dates. Options granted under all equity plans are exercisable at a price per share not less than the fair market value of the underlying common stock on the date of grant. The estimated fair value of options, including the effect of estimated forfeitures, is recognized over the requisite service period, which is typically the vesting period of each option.

A summary of stock option activity for the year ended December 31, 2019 is as follows:


				Weighted
			Weighted	Average	Average
			Average	Remaining	Intrinsic
	Number of		Exercise	Contractual	Value
	Options		Price	Term (Years)	(in thousands)
Outstanding as of December 31, 2018	—	$	—	—		—
Aggregate impact of conversion related to spin-off	6,456,982		14.90	—		—
Granted	1,687,029		8.17	—		—
Exercised	(47,580)		8.22	—		—
Cancelled or forfeited	(692,795)		13.50	—		—
Outstanding as of December 31, 2019	7,403,636	$	13.54	7.5	$	531
Exercisable at December 31, 2019	2,896,077	$	14.76	5.3	$	11

During the year ended December 31, 2019 the Company granted stock options to purchase an aggregate of 1,687,029 shares, at weighted average grant date fair values per option share of $4.97. The total grant date fair value of options granted during the year ended December 31, 2019 was $8.4 million.

As of December 31, 2019, the unrecognized share-based compensation expense, net of estimated forfeitures, related to all unvested stock options held by Cyclerion’s employees is $25.6 million and the weighted average period over which that expense is expected to be recognized is 2.9 years.

The weighted-average Black-Scholes assumptions used in estimating the fair value of the stock options granted by Cyclerion following the Separation during the year ended December 31, 2019 were as follows:


	Year Ended December 31,
	2019
Weighted average risk-free interest rate	1.77	%
Expected dividend yield	—
Expected option term (in years)	6.3
Expected stock price volatility	65.20	%

For the year ended December 31, 2019, expected volatility was estimated using an average of the historical volatility of the common stock of a group of similar companies that were publicly traded. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

Performance-based Stock Options

The Company has granted to certain employees performance-based options to purchase shares of common stock. These options are subject to performance-based milestone vesting. During the year ended December 31, 2019 there were no shares that vested as a result of performance milestone achievements. The Company recorded no share-based compensation expense related to these performance-based options for the year ended December 31, 2019.

The Company also has granted to certain employees stock options containing market conditions that vest upon the achievement of specified price targets of the Company’s share price for a period through December 31, 2024. Vesting is measured based upon the average closing price of the Company’s share price for any thirty consecutive trading days, subject to certain service requirements. Stock compensation cost is expensed on a straight-line basis over the derived service period for each stock price target within the award, ranging from approximately 4.0 to 4.6 years. The Company accelerates expense when a stock price target is achieved prior to the derived service period. The Company does not reverse expense recognized if the share price target(s) are ultimately not achieved but expense is reversed when a stock award recipient has a break in service prior to the completion of the derived service period. For the year ended December 31, 2019, the Company recorded a de minimis amount of share-based compensation expense related to these stock options containing market conditions. As of December 31, 2019, there was $0.4 million of unrecognized compensation costs related to stock options containing market conditions, which is expected to be recognized over a weighted-average period of 4.3 years.

A summary of stock awards containing market conditions activity for the year ended December 31, 2019 is as follows:


				Weighted
			Weighted	Average	Aggregate
			Average	Remaining	Intrinsic
	Number of		Exercise	Contractual	Value
	Options		Price	Term (years)	(in thousands)
Outstanding as of December 31, 2018	—	$	—	—	$	—
Granted	675,000		2.01	—		—
Exercised	—		—	—		—
Cancelled or forfeited	—		—	—		—
Outstanding as of December 31, 2019	675,000	$	2.01	9.9	$	479
Exercisable at December 31, 2019	—	$	—	—	$	—

The fair value of stock options containing market conditions is estimated using Monte Carlo simulations. The range of assumptions used to determine the fair value of these awards during the year ended December 31, 2019 were as follows:


	Year Ended
	December 31,
	2019
Weighted average risk-free interest rate	1.76	%
Expected dividend yield	—
Derived service period (in years)	4.0 - 4.6
Expected stock price volatility	65.91	%

The Company granted 675,000 stock awards containing market conditions during 2019, all of which remain unvested and outstanding at December 31, 2019.

Restricted Stock Units

The RSUs generally vest 25% per year on the approximate anniversary of the date of grant until fully vested, provided the employee remains continuously employed with the Company through each vesting date. Shares of the Company’s common stock are delivered to the employee upon vesting, subject to payment of applicable withholding taxes. The fair value of all RSUs is based on the market value of the Company’s common stock on the date of grant. Compensation expense, including the effect of estimated forfeitures, is recognized over the applicable service period.

A summary of RSU activity for the year ended December 31, 2019 is as follows:


		Weighted
		Average
	Number	Grant Date
	of Shares	Fair Value
Unvested as of December 31, 2018	—	$	—
Aggregate impact of conversion related to spin-off	932,469		15.55
Granted	133,705		11.76
Vested	(64,223)		15.72
Forfeited	(275,476)		15.54
Unvested as of December 31, 2019	726,475	$	14.85

As of December 31, 2019, the unrecognized share-based compensation expense, net of estimated forfeitures, related to all unvested restricted stock units by the Company’s employees is $6.5 million and the weighted-average period over which that expense is expected to be recognized is 2.7 years.

Restricted Stock Awards

Any of the Company’s non-employee directors who served as non-employee directors of Ironwood received shares of the Company’s unvested restricted stock in respect of any outstanding unvested awards of Ironwood restricted stock they held. Such restricted stock awards were subject to the vesting schedule set forth in the original Ironwood restricted stock award. On April 1, 2019, the Company made grants of its restricted stock to its non-employee directors who did not hold Ironwood restricted stock prior to the distribution. Such restricted stock awards have an equivalent value to the shares of the Company’s restricted stock granted to its non-employee directors who held Ironwood restricted stock prior to the distribution, and have been pro-rated to reflect each non-employee director’s period of service with the Company from the date of the distribution to the anticipated date of the first annual grant. These restricted stock awards fully vested on May 30, 2019.

A summary of the restricted stock for the year ended December 31, 2019 is as follows:


		Weighted
		Average
	Number	Grant Date
	of Shares	Fair Value
Unvested as of December 31, 2018	—	$	—
Granted	21,942		14.81
Vested	(21,942)		14.81
Unvested as of December 31, 2019	—	$	—

Loss per share

12 Months Ended

Dec. 31, 2019

Loss per share

Loss per share

10. Loss per share

Basic and diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Prior to April 1, 2019, there were no Cyclerion shares outstanding, as such, the shares outstanding immediately after the distribution and the private placement were used to calculate the basic and diluted net loss per share for all periods presented.

Basic and diluted earnings per share are calculated as follows:


	Year Ended December 31,
	2019		2018

Numerator:
Net loss (in thousands)	$	(123,008)	$	(115,252)

Denominator:
Number of common shares used in net loss per share — basic and diluted (in thousands)		27,380		27,380
Net loss per share — basic and diluted	$	(4.49)	$	(4.21)

Income Taxes

12 Months Ended

Dec. 31, 2019

Income Taxes

Income Taxes

11. Income Taxes

Prior to the Separation, the Company operated as part of Ironwood and not as a stand-alone company. The consolidated and combined financial statements reflect Cyclerion's financial position, results of operations, and cash flows as if its business was operated as part of Ironwood prior to the Separation, in conformity with U.S. GAAP. Under this approach, the Company determines its current taxes, deferred tax assets and liabilities and related tax expense as if it were filing separate tax returns in each jurisdiction.

In general, Cyclerion has not recorded a provision for federal or state income taxes as it has had cumulative net operating losses since inception.

A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows (in thousands):


	Year Ended December 31,
	2019		2018
U.S.	$	(122,437)	$	(115,252)
International		31		—
Loss before benefit from income taxes	$	(122,406)	$	(115,252)
Income tax benefit using U.S. federal statutory rate	$	(25,705)	$	(24,203)
State income taxes, net of federal benefit		(7,548)		(7,301)
Non-deductible share based compensation		55		(111)
Share-based compensation - shortfalls/(windfalls)		273		(106)
Permanent differences		1,528		40
Tax credits		(4,875)		(4,888)
Separation related adjustments		9,800		—
Other		(6)		—
Change in valuation allowance		26,478		36,569
	$	—	$	—

The effective income tax rate is based upon the income for the year, the composition of the income in different countries, and adjustments, if any, for the potential tax consequences, benefits or resolutions of audits or other tax contingencies. Our income tax rate in foreign jurisdictions is lower than our income tax rate in the United States.

Deferred tax assets (liabilities) consist of the following as of December 31, 2019 and 2018 (in thousands):


	Year Ended December 31,
	2019		2018
Deferred tax assets:
Net operating loss carryforwards	$	17,228	$	97,049
Tax credit carryforwards		3,733		15,529
Property and equipment		1,954		—
Share-based compensation		3,593		1,546
Operating lease - liability		20,195		—
Capitalized research and development costs		—		6,169
Accruals and reserves		1,561		1,639
Total deferred tax assets	$	48,264	$	121,932

Deferred tax liabilities:
Operating lease - right of use asset		(18,615)		—
Property and equipment		—		(556)
Total deferred tax liabilities		(18,615)		(556)
Net deferred tax assets		29,649		121,376

Valuation allowance		(29,649)		(121,376)
Net deferred tax assets		—		—

For the year ended December 31, 2018, deferred assets and liabilities are a result of the separate return calculation presentation and may not represent deferred assets and liability balances after the Separation. Certain deferred items may not have existed due to utilization by the Ironwood group prior to the Separation or may hold no future value subsequent to the Separation due to the Company’s future jurisdictional income projections. Federal net operating losses and research and development credit carryforwards are examples of deferred items that have been previously utilized or will have no future value to the Company as the Separation did not result in the transfer of loss carryforwards or tax credit carryforwards to the Company.

Management of Cyclerion has evaluated the positive and negative evidence bearing upon the possible realization of its deferred tax assets. Management has considered the Company's history of operating losses, both in the separate return method and as a standalone entity, in addition to the expected timing of the reversal of existing temporary differences and concluded, in accordance with the applicable accounting standards, that it is more likely than not that the Company will not realize the benefit of its deferred tax assets. Accordingly, the net deferred tax assets have been fully reserved at December 31, 2019 and December 31, 2018. Management reevaluates the positive and negative evidence on a quarterly basis.

The valuation allowance increased by approximately $26.5 million during the year ended December 31, 2019 primarily due to an increase in net operating losses, tax credit carryforwards and deferred tax assets related to equity compensation.

Cyclerion did not generate net operating loss carryforwards or tax credit carryforwards available for its use until its inception and operation as a standalone legal entity. At December 31, 2019, Cyclerion has federal and state net operating loss carryforwards of approximately $63.1 million to offset future federal and state taxable income. The federal net operating losses were generated after January 1, 2018 and will be carried forward indefinitely as they do not expire. The state net operating losses expire beginning in 2039. Cyclerion also had tax credit carryforwards of approximately $3.8 million as of December 31, 2019 to offset future federal and state income taxes, which expire beginning in 2039.

The Company's ability to use its net operating loss carryforwards and tax credits to offset future taxable income could be subject to restrictions under Section 382 of the U.S. Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). These potential restrictions may limit the future use of the operating loss carryforwards and tax credits if certain ownership changes described in the Internal Revenue Code occur. Changes in stock ownership may occur that would create these limitations on the Company's use of the operating loss carryforwards and tax credits. In such a situation, the Company may be required to pay income taxes, even though significant operating loss carryforwards and tax credits exist.

The Company has not as yet conducted a study of its research and development credit carry forwards. This study may result in an adjustment to the Company's research and development credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company's research and development credits, and if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the consolidated balance sheets or statements of operations if an adjustment were required.

Upon audit, taxing authorities may challenge all or part of an uncertain income tax position. While Cyclerion has no history of tax audits on a standalone basis, Ironwood has been audited by federal and state taxing authorities in the past. Cyclerion may be subject to tax audits by federal and state taxing authorities. Accordingly, Cyclerion regularly assesses the outcome of potential examinations in each of the taxing jurisdictions when determining the adequacy of the amount of unrecognized tax benefit recorded. Cyclerion had no unrecognized tax benefits as of December 31, 2019 and 2018. Cyclerion will recognize interest and penalties, if any, related to uncertain tax positions in income tax expense. As of December 31, 2019 and 2018, no interest or penalties have been accrued.

Cyclerion has not yet filed any tax returns. Therefore, there are no current statute of limitations for assessment by the Internal Revenue Service or state tax authorities on Cyclerion’s tax returns. Additionally, there are currently no federal or state income tax audits in progress.

Defined Contribution Plan	12 Months Ended
Defined Contribution Plan	Dec. 31, 2019
Defined Contribution Plan
Defined Contribution Plan	12. Defined Contribution Plan Prior to the Separation, Ironwood maintained a defined contribution 401(k) Savings Plan in the form of a qualified 401(k) plan for the benefit of substantially all of its employees, which included Ironwood employees who became Cyclerion employees. Compensation expense related to the 401(k) match was allocated to Cyclerion using a pro-rata method based on project-related costs and headcount that management believes are consistent and reasonable. Subsequent to the Separation, Cyclerion adopted a defined contribution 401(k) Savings Plan similar to the plan in place at Ironwood. The plan assets under the Ironwood defined contribution 401(k) Savings Plan were transferred to the Cyclerion plan. Subject to certain IRS limits, eligible employees may elect to contribute from 1% to 100% of their compensation. Cyclerion contributions to the plan are at the sole discretion of the board of directors. Currently, Cyclerion provides a matching contribution of 75% of the employee’s contributions, up to $6,000 annually. Included in compensation expense for employees that are directly attributable to Cyclerion is approximately $0.6 million and $0.4 million for years ended December 31, 2019 and 2018, respectively.

Workforce Reduction

12 Months Ended

Dec. 31, 2019

Workforce Reduction

Workforce Reduction

13. Workforce Reduction

On October 30, 2019, the Company began a reduction of its current workforce by approximately thirty (30) full-time employees in order to align its resources with its ongoing clinical and preclinical programs, innovation strategy and partnering efforts.

The Company estimates total costs related to the workforce reduction to be approximately $3.0 million. The workforce reduction was substantially completed during the year ended December 31, 2019, in which the Company recorded approximately $2.8 million of severance and benefits costs.

The following table summarizes the accrued liabilities activity recorded in connection with the reduction in workforce for the year ended December 31, 2019 (in thousands):



	Amounts accrued at								Amounts accrued at
	December 31, 2018		Charges		Amount paid		Adjustments		December 31, 2019
October 2019 Workforce Reduction	$	—	$	2,807	$	798	$	—	$	2,009
Total	$	—	$	2,807	$	798	$	—	$	2,009

Ironwood Workforce Reduction

On June 27, 2018, as part of its plans to separate its sGC business from its commercial and gastrointestinal business, Ironwood initiated a reduction in its headquarters-based workforce by approximately 40 employees and substantially completed the reduction in its workforce during the year ending December 31, 2018.

On February 7, 2019, following further analysis of its strategy and core business needs, Ironwood commenced another reduction in its workforce by 35 employees, primarily based in its headquarters. Ironwood completed the reduction in its workforce during the first quarter of 2019. Even though employees expected to go to Cyclerion were excluded from the workforce reduction, certain charges associated with the reduction were allocated to Cyclerion.

Prior to the Separation, expenses related to these workforce reductions were allocated to Cyclerion using a pro rata method based on internal project assignments and headcount that management believes are consistent and reasonable. Pursuant to the terms of the Separation Agreement entered into between the Company and Ironwood on March 30, 2019, the accrued liability related to these workforce reductions remained with Ironwood.

The following table summarizes the accrued liabilities activity allocated to Cyclerion in connection with the Ironwood workforce reduction for the year ended December 31, 2019 (in thousands):



	Amounts Accrued at						Balance Assumed		Amounts Accrued at
	December 31, 2018		Charges		Amount Paid		by Ironwood		December 31, 2019
June 2018 Ironwood Reduction	$	565	$	—	$	(268)	$	(297)	$	—
February 2019 Ironwood Reduction		—		580		(90)	$	(490)		—
Total	$	565	$	580	$	(358)	$	(787)	$	—

Subsequent Events	12 Months Ended
Subsequent Events	Dec. 31, 2019
Subsequent Events
Subsequent Events	14. Subsequent Events On February 28, 2020, the Company entered into an amendment to the Master Lease at 301 Binney Street in Cambridge, Massachusetts. The amendment provided for the partial termination of the Company’s obligations with respect to a portion of the leased premises of approximately 40,000 rentable square feet. The Company will continue to lease approximately 74,000 rentable square feet under terms of the amended lease. The Company paid a termination fee of approximately $6.3 million upon execution of the lease amendment and reduced its remaining lease payments through June 2029 by approximately $41.9 million. As part of the lease amendment, the Company’s security deposit was reduced by approximately $2.7 million and as such, this amount is reflected as short-term restricted cash as a component of other current assets on the Company’s consolidated balance sheet as of December 31, 2019. The remaining impact on this lease modification will be reflected in the Company’s financial results for the year ending December 31, 2020.

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2019

Summary of Significant Accounting Policies

Basis of Presentation

The Company did not operate as a separate, stand-alone entity for the full period covered by the annual consolidated and combined financial statements. The Company’s consolidated balance sheet as of December 31, 2019 consists of the consolidated balances of Cyclerion as prepared on a stand-alone basis. The Company’s combined balance sheet as of December 31, 2018 and consolidated and combined statements of operations and comprehensive loss for the years ended December 31, 2019 and 2018, as well as our statements of cash flows for the years ended December 31, 2019 and 2018, respectively, have been prepared on a “carve out” basis for the periods and dates prior to the Separation on April 1, 2019.

The consolidated and combined financial statements reflect the historical results of the operations, financial position and cash flows of Cyclerion, in conformity with United States generally accepted accounting principles (“U.S. GAAP”).

The accompanying consolidated and combined financial statements reflect the consolidated and combined financial position and consolidated and combined results of operations of the Company as an independent, publicly-traded company for the period after the Separation on April 1, 2019. The consolidated and combined financial statements also reflect the financial position and results of operations of the Company as a combined reporting entity of Ironwood for periods prior to the Separation.

These consolidated and combined financial statements of Cyclerion reflect the assets, liabilities, and expenses directly attributable to Cyclerion, as well as allocations of certain corporate level assets, liabilities and expenses, deemed necessary to fairly present the financial position, results of operations and cash flows of Cyclerion, as discussed further below. As such, these allocations may not be indicative of the actual amounts that would have been recorded had Cyclerion operated as an independent, publicly traded company for the years presented.

During the year ended December 31, 2019, the Company recorded approximately $7.8 million in Separation-related adjustments in its consolidated and combined statements of stockholders’ equity (deficit). The Separation-related adjustments primarily related to differences between assets and liabilities transferred to Cyclerion as a result of the Separation and assets and liabilities reported in the Company’s combined balance sheet as of March 31, 2019.

Prior to the Separation, Cyclerion was dependent upon Ironwood for all of its working capital and financing requirements, as Ironwood used a centralized approach to cash management and financing its operations. There were no cash amounts specifically attributable to Cyclerion for the historical periods presented; therefore, there is no cash reflected for historical periods in the consolidated and combined financial statements. Accordingly, cash and cash equivalents, debt or related interest expense have not been allocated to Cyclerion in the historical financial statements. Financing transactions related to Cyclerion are accounted for as a component of net parent investment in the historical combined balance sheets and as a financing activity on the accompanying combined statements of cash flows.

Prior to the Separation, Cyclerion’s combined financial statements included an allocation of expenses related to certain Ironwood corporate functions, including senior management, legal, human resources, finance, information technology and quality assurance. These expenses were allocated to Cyclerion based on direct usage or benefit where identifiable, with the remainder allocated pro-rata based on project related costs, headcount or other measures. These allocations may not be indicative of the actual expense that would have been incurred had Cyclerion operated as an independent, publicly traded company for the periods presented.

Prior to the Separation, the combined balance sheets of Cyclerion included assets and liabilities that were allocated principally on a specific identification basis and net parent investment was shown in lieu of stockholders’ equity. As a result of the Separation, the Company’s net parent investment balance was reclassified to paid-in capital.

Principles of Consolidation

Segment Information

Use of Estimates

Cash and Cash Equivalents

Restricted Cash

Property and Equipment


		Estimated
		Useful Life
Asset Description		(In Years)
Laboratory equipment		5
Computer and office equipment		3
Furniture and fixtures		7
Software		3

Leasehold improvements are amortized over the shorter of the estimated useful life of the asset or the lease term. The Company has no capital leases.

Fair Value of Investment Instruments

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Foreign Currency Translation Adjustment

Related Party Accounts Receivable

Impairment of Long-Lived Asset

Leases

As part of the ASC 842 adoption, the Company has used certain practical expedients outlined in the guidance. These practical expedients include:

Account policy election to use the short-term lease exception by asset class;

Election of the practical expedient package during transition, which includes:

An entity need not reassess whether any expired or existing contracts are or contain leases.

An entity need not reassess initial direct costs for any existing leases.

Revenue

Research and Development Costs

General and Administrative Expenses

Income taxes

Patent Costs

Interest and Other Income

Subsequent Events

New Accounting Pronouncements

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2019

Summary of Significant Accounting Policies

Schedule of estimated useful lives of property and equipment


		Estimated
		Useful Life
Asset Description		(In Years)
Laboratory equipment		5
Computer and office equipment		3
Furniture and fixtures		7
Software		3

Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2019

Fair Value of Financial Instruments

Schedule of financial assets measured at fair value on a recurring basis and indicating the level of the fair value hierarchy

The following tables presents information about the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2019 and indicate the level of the fair value hierarchy used to determine such fair values (in thousands):


	Fair Value Measurements as of
	December 31, 2019 Using:
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	93,859	$	—	$	—	$	93,859
Cash equivalents	$	93,859	$	—	$	—	$	93,859

Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2019

Property and Equipment

Schedule of property and equipment, net

Property and equipment, net consisted of the following (in thousands):


	December 31,
	2019		2018
Laboratory equipment	$	14,505	$	17,753
Software		2,232		2,593
Construction in progress		915		741
Computer and office equipment		1,890		901
Leasehold improvements		13,673		—
Property and equipment, gross		33,215		21,988
Less: accumulated depreciation and amortization		(21,602)		(15,491)
Property and equipment, net	$	11,613	$	6,497

Accrued Expenses and Other Current Liabilities (Tables)

12 Months Ended

Dec. 31, 2019

Accrued Expenses and Other Current Liabilities

Schedule of accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):


	December 31,
	2019		2018
Accrued incentive compensation	$	3,767	$	4,889
Salaries		1,730		1,513
Accrued vacation		969		1,048
Professional fees		441		1,019
Accrued severance and benefit costs		2,009		565
Other		404		770
	$	9,320	$	9,804

Leases (Tables)

12 Months Ended

Dec. 31, 2019

Leases

Schedule of supplemental cash flow information related to leases


	Year Ended
	December 31,
	2019
Right-of-use assets obtained in exchange for new operating lease upon lease commencement (in thousands)	$	71,266
Cash paid for amounts included in the measurement of lease liabilities (in thousands)	$	3,288
Cash received for tenant improvements included in the measurement of lease liabilities (in thousands)	$	2,289
Weighted-average remaining lease term of operating leases (in years)		9.5
Weighted-average discount rate of operating leases		10.9	%

Schedule of future minimum lease payments under non-cancelable operating leases

Future minimum lease payments under non-cancelable operating leases under ASC 842 as of December 31, 2019 are as follows (in thousands):


	Operating Lease
	Payments
2020	$	11,212
2021		11,537
2022		11,872
2023		12,217
2024		12,573
2025 and thereafter		61,274
Total future minimum lease payments		120,685
Less: present value adjustment		46,765
Operating lease liabilities at December 31, 2019		73,920
Less: current portion of operating lease liabilities		3,420
Operating lease liabilities, net of current portion	$	70,500

Total future minimum lease payments to be received under the sublease agreement


	Total
	Sublease
	Payments
2020	$	1,009
2021		1,636
2022		1,683
2023		1,733
2024		1,783
2025 and thereafter		8,693
Total future minimum lease payments	$	16,537

Share-based Compensation Plans (Tables)

12 Months Ended

Dec. 31, 2019

Share-based Compensation Plans

Schedule of share-based compensation expense


	Years Ended December 31,
	2019		2018
Research and development	$	8,729	$	7,093
General and administrative		10,901		5,340
	$	19,630	$	12,433

Schedule of stock option activity


				Weighted
			Weighted	Average	Average
			Average	Remaining	Intrinsic
	Number of		Exercise	Contractual	Value
	Options		Price	Term (Years)	(in thousands)
Outstanding as of December 31, 2018	—	$	—	—		—
Aggregate impact of conversion related to spin-off	6,456,982		14.90	—		—
Granted	1,687,029		8.17	—		—
Exercised	(47,580)		8.22	—		—
Cancelled or forfeited	(692,795)		13.50	—		—
Outstanding as of December 31, 2019	7,403,636	$	13.54	7.5	$	531
Exercisable at December 31, 2019	2,896,077	$	14.76	5.3	$	11

Schedule of weighted-average assumptions used in estimating the fair value of the stock options


	Year Ended December 31,
	2019
Weighted average risk-free interest rate	1.77	%
Expected dividend yield	—
Expected option term (in years)	6.3
Expected stock price volatility	65.20	%

Summary of stock awards containing market conditions activity


				Weighted
			Weighted	Average	Aggregate
			Average	Remaining	Intrinsic
	Number of		Exercise	Contractual	Value
	Options		Price	Term (years)	(in thousands)
Outstanding as of December 31, 2018	—	$	—	—	$	—
Granted	675,000		2.01	—		—
Exercised	—		—	—		—
Cancelled or forfeited	—		—	—		—
Outstanding as of December 31, 2019	675,000	$	2.01	9.9	$	479
Exercisable at December 31, 2019	—	$	—	—	$	—

Schedule of weighted-average assumptions used in estimating the fair value of the stock awards containing market conditions


	Year Ended
	December 31,
	2019
Weighted average risk-free interest rate	1.76	%
Expected dividend yield	—
Derived service period (in years)	4.0 - 4.6
Expected stock price volatility	65.91	%

Summary of RSU activity


		Weighted
		Average
	Number	Grant Date
	of Shares	Fair Value
Unvested as of December 31, 2018	—	$	—
Aggregate impact of conversion related to spin-off	932,469		15.55
Granted	133,705		11.76
Vested	(64,223)		15.72
Forfeited	(275,476)		15.54
Unvested as of December 31, 2019	726,475	$	14.85

Summary of restricted stock


		Weighted
		Average
	Number	Grant Date
	of Shares	Fair Value
Unvested as of December 31, 2018	—	$	—
Granted	21,942		14.81
Vested	(21,942)		14.81
Unvested as of December 31, 2019	—	$	—

Loss per share (Tables)

12 Months Ended

Dec. 31, 2019

Loss per share

Schedule of basic and diluted earnings per share


	Year Ended December 31,
	2019		2018

Numerator:
Net loss (in thousands)	$	(123,008)	$	(115,252)

Denominator:
Number of common shares used in net loss per share — basic and diluted (in thousands)		27,380		27,380
Net loss per share — basic and diluted	$	(4.49)	$	(4.21)

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Income Taxes

Summary of reconciliation of income taxes computed using the U.S. federal statutory rate

A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows (in thousands):


	Year Ended December 31,
	2019		2018
U.S.	$	(122,437)	$	(115,252)
International		31		—
Loss before benefit from income taxes	$	(122,406)	$	(115,252)
Income tax benefit using U.S. federal statutory rate	$	(25,705)	$	(24,203)
State income taxes, net of federal benefit		(7,548)		(7,301)
Non-deductible share based compensation		55		(111)
Share-based compensation - shortfalls/(windfalls)		273		(106)
Permanent differences		1,528		40
Tax credits		(4,875)		(4,888)
Separation related adjustments		9,800		—
Other		(6)		—
Change in valuation allowance		26,478		36,569
	$	—	$	—

Summary of deferred tax assets (liabilities)

Deferred tax assets (liabilities) consist of the following as of December 31, 2019 and 2018 (in thousands):


	Year Ended December 31,
	2019		2018
Deferred tax assets:
Net operating loss carryforwards	$	17,228	$	97,049
Tax credit carryforwards		3,733		15,529
Property and equipment		1,954		—
Share-based compensation		3,593		1,546
Operating lease - liability		20,195		—
Capitalized research and development costs		—		6,169
Accruals and reserves		1,561		1,639
Total deferred tax assets	$	48,264	$	121,932

Deferred tax liabilities:
Operating lease - right of use asset		(18,615)		—
Property and equipment		—		(556)
Total deferred tax liabilities		(18,615)		(556)
Net deferred tax assets		29,649		121,376

Valuation allowance		(29,649)		(121,376)
Net deferred tax assets		—		—

Workforce Reduction (Tables)

12 Months Ended

Dec. 31, 2019

Workforce Reduction

Schedule of accrued liabilities activity allocated to Cyclerion in connection with the reduction in workforce

The following table summarizes the accrued liabilities activity recorded in connection with the reduction in workforce for the year ended December 31, 2019 (in thousands):



	Amounts accrued at								Amounts accrued at
	December 31, 2018		Charges		Amount paid		Adjustments		December 31, 2019
October 2019 Workforce Reduction	$	—	$	2,807	$	798	$	—	$	2,009
Total	$	—	$	2,807	$	798	$	—	$	2,009



	Amounts Accrued at						Balance Assumed		Amounts Accrued at
	December 31, 2018		Charges		Amount Paid		by Ironwood		December 31, 2019
June 2018 Ironwood Reduction	$	565	$	—	$	(268)	$	(297)	$	—
February 2019 Ironwood Reduction		—		580		(90)	$	(490)		—
Total	$	565	$	580	$	(358)	$	(787)	$	—

Nature of Business (Details) $ in Thousands			12 Months Ended
Nature of Business (Details) $ in Thousands	Apr. 02, 2019 USD ($) shares	Apr. 01, 2019	Dec. 31, 2019 USD ($)	May 03, 2019 employee
The Separation
Common stock dividend issued (shares of Cyclerion per ten shares of Ironwood)		0.1
Gross proceeds from issuance of shares to accredited investors			$ 175,000
Basis of Presentation
Separation-related adjustments			$ 7,752
Cyclerion GmbH
Nature of Operations
Number of employees \| employee				1
Private Placement
The Separation
Shares issued to accredited investors \| shares	11,817,165
Gross proceeds from issuance of shares to accredited investors	$ 175,000
Net proceeds from issuance of shares to accredited investors	$ 165,000

Summary of Significant Accounting Policies - Segments and Cash (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($) segment
Segment Information
Number of reportable business segment \| segment	1
Cash and Cash Equivalents
Cash	$ 0
Restricted Cash
Contingent liability under an unused letter of credit, posted as a security deposit	7,700
Current restricted cash	$ 2,700
Current restricted cash, Balance sheet location	us-gaap:OtherAssetsCurrent
Restricted cash in non-current assets	$ 4,991

Summary of Significant Accounting Policies - Property and Equipment (Details)	12 Months Ended
	Dec. 31, 2019
Laboratory equipment
Property and Equipment
Estimated Useful Life (In Years)	5 years
Computer and office equipment
Property and Equipment
Estimated Useful Life (In Years)	3 years
Furniture and fixtures
Property and Equipment
Estimated Useful Life (In Years)	7 years
Software
Property and Equipment
Estimated Useful Life (In Years)	3 years

Summary of Significant Accounting Policies - Leases (Details) - ft²	12 Months Ended
	Dec. 31, 2019	Oct. 18, 2019	Mar. 31, 2019
Leases
Election of practical expedients package	true
Space subleased to third party (in square feet)		15,700	24,000

Summary of Significant Accounting Policies - Revenue, Patent Costs, and Interest and Other Income (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Revenue
Development Agreement, initial term	2 years
Development Agreement, renewal period	1 year
Development Agreement, period for notification of cancellation	6 months
Interest and other income
Interest and other income
Interest income generated form cash and cash equivalents balances	$ 1.9
Net sublease income	0.1
Patents
Patent Costs
Legal and other fees	$ 0.8	$ 0.9

Related Party Transactions (Details) - USD ($) $ in Thousands, shares in Millions		3 Months Ended	9 Months Ended	12 Months Ended
	Apr. 02, 2019	Mar. 31, 2019	Dec. 31, 2019	Dec. 31, 2019	Dec. 31, 2018
Related Party Transactions
Operating expense				$ 129,544	$ 115,252
Revenue from related party				4,507
Payments to provide research and development transaction support services				200
Ironwood \| Separation agreement
Related Party Transactions
Amounts due to related party			$ 100	100
Payments for Tenant Improvements				1,300
Ironwood \| Transition services agreements
Related Party Transactions
Operating expense			200
Ironwood \| Development agreement
Related Party Transactions
Revenue from related party			4,500
Amounts due from related party			$ 1,500	1,500
Ironwood \| Corporate costs
Related Party Transactions
Related party expense		$ 6,800			18,300
Ironwood \| Health insurance services
Related Party Transactions
Related party expense				$ 500	$ 2,100
Peter Hecht \| Private Placement
Related Party Transactions
Number of shares of Ironwood common stock donated to American Endowment Foundation	2.5
American Endowment Foundation \| Private Placement
Related Party Transactions
Investment in common stock by related party	$ 34,000
Mark Currie \| Private Placement
Related Party Transactions
Investment in common stock by related party	$ 4,000

Fair Value of Financial Instruments (Details) - Recurring $ in Thousands	Dec. 31, 2019 USD ($)
Cash equivalents:
Total cash equivalents	$ 93,859
Money market funds
Cash equivalents:
Total cash equivalents	93,859
Level 1
Cash equivalents:
Total cash equivalents	93,859
Level 1 \| Money market funds
Cash equivalents:
Total cash equivalents	$ 93,859

Property and Equipment (Details) - USD ($) $ in Thousands	12 Months Ended
Property and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Property and Equipment
Gross property and equipment	$ 33,215	$ 21,988
Less: accumulated depreciation and amortization	(21,602)	(15,491)
Property and equipment, net	11,613	6,497
Depreciation and amortization	2,700	1,528
Disposal loss of property and equipment, net	(751)
Accounts payable and accrued expenses
Property and Equipment
Property and equipment, net	800	500
Laboratory equipment
Property and Equipment
Gross property and equipment	14,505	17,753
Software
Property and Equipment
Gross property and equipment	2,232	2,593
Construction in progress
Property and Equipment
Gross property and equipment	915	741
Computer and office equipment
Property and Equipment
Gross property and equipment	1,890	$ 901
Leasehold improvements
Property and Equipment
Gross property and equipment	$ 13,673

Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Accrued Expenses and Other Current Liabilities
Accrued incentive compensation	$ 3,767	$ 4,889
Salaries	1,730	1,513
Accrued vacation	969	1,048
Professional fees	441	1,019
Accrued severance and benefit costs	2,009	565
Other	404	770
Total	$ 9,320	$ 9,804

Leases - Master Lease (Details) $ in Thousands		9 Months Ended	12 Months Ended
Leases - Master Lease (Details) $ in Thousands	Apr. 01, 2019 USD ($) ft² item	Dec. 31, 2019 USD ($)	Dec. 31, 2019 USD ($)
Leases
Letter of credit posted with the landlord as a security deposit		$ 7,700	$ 7,700
Lease liability		73,920	73,920
Less: current portion of operating lease liabilities		3,420	3,420
Noncurrent lease liability		70,500	70,500
Right-of-use asset		68,137	68,137
Lease cost		9,300
Master Lease
Leases
Rent space (in square feet) \| ft²	114,000
Term of lease	123 months
Number of extension option \| item	2
Existence of extension option	true
Renewal term	5 years
Letter of credit posted with the landlord as a security deposit	$ 7,700
Annual base rent			$ 11,000
Increase in base rent on a yearly basis (as a percent)			3.00%
Abatement of base rent		2,700	$ 2,700
Discount rate (as a percent)	10.90%
Lease liability	$ 71,300
Tenant improvement allowance		2,300	2,300
Right-of-use asset	$ 71,300	68,100	$ 68,100
Lease cost		$ 9,300

Leases - Supplemental cash flow information (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($)
Leases
Right-of-use assets obtained in exchange for new operating lease upon lease commencement (in thousands)	$ 71,266
Cash paid for amounts included in the measurement of lease liabilities (in thousands)	3,288
Cash received for tenant improvements included in the measurement of lease liabilities (in thousands)	$ 2,289
Weighted-average remaining lease term of operating leases (in years)	9 years 6 months
Weighted-average discount rate of operating leases	10.90%

Leases - Future minimum lease payments under non-cancelable operating leases (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Future minimum lease payments under non-cancelable operating leases
2020	$ 11,212
2021	11,537
2022	11,872
2023	12,217
2024	12,573
2025 and hereafter	61,274
Total future minimum lease payments	120,685
Less: present value adjustment	46,765
Operating lease liabilities at December 31, 2019	73,920
Less: current portion of operating lease liabilities	3,420
Operating lease liabilities, net of current portion	$ 70,500

Leases - Sublease as Lessee (Details) - USD ($) $ in Millions		9 Months Ended
	Mar. 31, 2019	Dec. 31, 2019
Sublease as lessee
Lease cost		$ 9.3
Ironwood
Sublease as lessee
Sublease initial term	1 month
Subleased term	1 month 15 days
Rent expense related to sublease		$ 0.2

Leases - Sublease as Lessor (Details) $ in Millions		12 Months Ended
Leases - Sublease as Lessor (Details) $ in Millions	Oct. 18, 2019 USD ($) ft²	Dec. 31, 2019 USD ($)	Mar. 31, 2019 ft²
Sublease as lessor
Space subleased to third party (in square feet) \| ft²	15,700		24,000
Sublease, Annual base rent	$ 1.5
Sublease, Increase in base rent over the term of the lease (as a percent)	3.00%
Abatement of base rent	$ 0.7
Sublease includes an initial security deposit	$ 0.5
Sublease, Initial security deposit period (in months)	9 months
Estimated fair value of services to be received under the sublease agreement		$ 4.2
Gross sublease income, net of rent expense		0.4
Interest and other income
Sublease as lessor
Net sublease income		$ 0.1

Leases - Future minimum lease payments to be received under the sublease agreement (Details) $ in Thousands	Feb. 28, 2020 ft²	Dec. 31, 2019 USD ($)
Total future minimum lease payments to be received under the sublease agreement
2020		$ 1,009
2021		1,636
2022		1,683
2023		1,733
2024		1,783
2025 and thereafter		8,693
Total future minimum lease payments to be received		$ 16,537
Subsequent Event
Total future minimum lease payments to be received under the sublease agreement
Rentable square feet terminated \| ft²	40,000

Share-based Compensation Plans - Summary (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($) employee	Dec. 31, 2018 USD ($)
Share-based Compensation Plans
Number of employees impacted \| employee	143
Share-based compensation	$ 19,630	$ 12,433
Research and development
Share-based Compensation Plans
Share-based compensation	8,729	7,093
General and administrative
Share-based Compensation Plans
Share-based compensation	10,901	$ 5,340
Restricted Stock Units
Share-based Compensation Plans
Incremental compensation expense due to modification	0
Restricted Stock Awards
Share-based Compensation Plans
Incremental compensation expense due to modification	0
Vested stock options
Share-based Compensation Plans
Incremental compensation expense due to modification	300
Unvested stock options
Share-based Compensation Plans
Incremental compensation expense due to modification	$ 7,500

Share-based Compensation Plans - Stock Options (Details) - Stock options $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($) $ / shares shares
Share-based Compensation Plans
Term (in years)	10 years
Vesting period	4 years
Number of Options
Outstanding at beginning of the year (in shares) \| shares	0
Aggregate impact of conversion related to spin-off (in shares) \| shares	6,456,982
Granted (in shares) \| shares	1,687,029
Exercised (in shares) \| shares	(47,580)
Cancelled or forfeited (in shares) \| shares	(692,795)
Outstanding at end of the year (in shares) \| shares	7,403,636
Exercisable (in shares) \| shares	2,896,077
Weighted Average Exercise Price
Outstanding at beginning of the year (in dollars per share)	$ 0.00
Aggregate impact of conversion related to spin-off (in shares)	14.90
Granted (in dollars per share)	8.17
Exercised (in dollars per share)	8.22
Cancelled or forfeited (in dollars per share)	13.50
Outstanding at end of the year (in dollars per share)	13.54
Exercisable (in dollars per share)	$ 14.76
Weighted Average Remaining Contractual Term (years)
Weighted Average Remaining Contractual Term, Outstanding (in years)	7 years 6 months
Weighted Average Remaining Contractual Term, Exercisable (in years)	5 years 3 months 18 days
Aggregate Intrinsic Value, Outstanding \| $	$ 531
Aggregate Intrinsic Value, Exercisable \| $	$ 11
Weighted average grant date fair value per option share	$ 4.97
Total grant date fair value of options granted \| $	$ 8,400
Unrecognized share-based compensation expense \| $	$ 25,600
Expected period to recognize the expense	2 years 10 months 24 days
Assumptions used to estimate fair value of stock options
Weighted average risk-free interest rate	1.77%
Expected dividend yield	0.00%
Expected option term (in years)	6 years 3 months 18 days
Expected stock price volatility	65.20%

Share-based Compensation Plans - Stock Awards Containing Market Conditions (Details) - Performance stock options $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($) D $ / shares shares
Share-based Compensation Plans
Threshold consecutive trading days, used as a base for measurement of vesting of stock awards \| D	30
Unrecognized share-based compensation expense \| $	$ 400
Expected period to recognize the expense (in years)	4 years 3 months 18 days
Number of Options
Outstanding at beginning of the year (in shares) \| shares	0
Granted (in shares) \| shares	675,000
Outstanding at end of the year (in shares) \| shares	675,000
Weighted-Average Exercise Price
Outstanding at beginning of the year (in dollars per share) \| $ / shares	$ 0.00
Granted (in dollars per share) \| $ / shares	2.01
Outstanding at end of the year (in dollars per share) \| $ / shares	$ 2.01
Weighted Average Remaining Contractual Term (years)
Weighted average remaining contractual term, outstanding at the end of period (in years)	9 years 10 months 24 days
Aggregate intrinsic value, outstanding at the end of period \| $	$ 479
Assumptions used to estimate fair value of performance-based stock options
Weighted average risk-free interest rate	1.76%
Expected dividend yield	0.00%
Expected stock price volatility	65.91%
Minimum
Assumptions used to estimate fair value of performance-based stock options
Derived service period (in years)	4 years
Maximum
Assumptions used to estimate fair value of performance-based stock options
Derived service period (in years)	4 years 7 months 6 days

Share-based Compensation Plans - Restricted Stock Units and Restricted Stock Awards (Details) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2019 USD ($) $ / shares shares
Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	25.00%
Number of Shares
Unvested at the beginning of the period (in shares) \| shares	0
Aggregate impact of conversion related to spin-off (in Shares) \| shares	932,469
Granted (in shares) \| shares	133,705
Vested (in shares) \| shares	(64,223)
Forfeited (in shares) \| shares	(275,476)
Unvested the end of the period (in shares) \| shares	726,475
Weighted-Average Grant Date Fair Value
Unvested at the beginning of the period (in dollars per share) \| $ / shares	$ 0
Aggregate impact of conversion related to spin-off (in dollars per share) \| $ / shares	15.55
Granted (in dollars per share) \| $ / shares	$ 11.76
Vested (in dollars per share) \| $ / shares	15.72
Forfeited (in dollars per share) \| $ / shares	15.54
Unvested restricted common stock at the end of the period (in dollars per share) \| $ / shares	$ 14.85
unrecognized share-based compensation expense \| $	$ 6.5
Expected period to recognize the expense	2 years 8 months 12 days
Restricted Stock Awards
Number of Shares
Unvested at the beginning of the period (in shares) \| shares	0
Granted (in shares) \| shares	21,942
Vested (in shares) \| shares	(21,942)
Unvested the end of the period (in shares) \| shares	0
Weighted-Average Grant Date Fair Value
Unvested at the beginning of the period (in dollars per share) \| $ / shares	$ 0.00
Granted (in dollars per share) \| $ / shares	14.81
Vested (in dollars per share) \| $ / shares	14.81
Unvested restricted common stock at the end of the period (in dollars per share) \| $ / shares	$ 0.00

Loss per share (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Numerator:
Net loss	$ (123,008)	$ (115,252)
Denominator:
Number of common shares used in net loss per share - basic and diluted (in thousands)	27,380	27,380
Net loss per share - basic and diluted	$ (4.49)	$ (4.21)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Income Taxes - Reconciliation of income taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Reconciliation of income taxes computed using the U.S. federal statutory rate
U.S.	$ (122,437)	$ (115,252)
International	31
Loss before benefits from income taxes	(122,406)	(115,252)
Income tax benefit using U.S. federal statutory rate	(25,705)	(24,203)
State income tax, net of federal benefit	(7,548)	(7,301)
Non-deductible share based compensation	55	(111)
Share-based compensation - shortfalls/ (windfalls)	273	(106)
Permanent differences	1,528	40
Tax credits	(4,875)	(4,888)
Separation related adjustments	9,800
Other	(6)
Change in valuation allowance	26,478	36,569
Income Tax Expense (Benefit), Total	$ 0	$ 0

Income Taxes - Deferred tax assets (liabilities) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2019
Deferred tax assets:
Net operating loss carryforwards	$ 97,049	$ 17,228
Tax credit carryforwards	15,529	3,733
Property and equipment		1,954
Share-based compensation	1,546	3,593
Operating lease - liability		20,195
Capitalized research and development costs	6,169
Accruals and reserves	1,639	1,561
Total deferred tax assets	121,932	48,264
Deferred tax liabilities:
Operating lease - right of use assets		(18,615)
Property and equipment	(556)
Total deferred tax liabilities	(556)	(18,615)
Net deferred tax assets	121,376	29,649
Valuation allowance	(121,376)	(29,649)
Net deferred tax assets	0	$ 0
Increase (decrease) in valuation allowance	$ 26,500

Income Taxes - Additional disclosures (Details) - USD ($) $ in Millions	Dec. 31, 2019	Dec. 31, 2018
Income Taxes
Tax credit carryforwards	$ 3.8
Unrecognized tax benefits	0.0	$ 0.0
Accrued interest or penalties	0.0	$ 0.0
Federal
Income Taxes
Net operating loss carryforwards	$ 63.1

Defined Contribution Plan (Details) - USD ($)	12 Months Ended
Defined Contribution Plan (Details) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Defined Contribution Plan
401 (k) Savings Plan	us-gaap:QualifiedPlanMember
Matching contribution (as a percent of employee's contributions)	75.00%
Maximum amount of employer matching contribution	$ 6,000
Defined contribution plan expense	$ 600,000	$ 400,000
Minimum
Defined Contribution Plan
Percent of compensation eligible employees may elect to contribute	1.00%
Maximum
Defined Contribution Plan
Percent of compensation eligible employees may elect to contribute	100.00%

Workforce Reduction - October 2019 (Details) - Current workforce reductions $ in Thousands		12 Months Ended
	Oct. 30, 2019 employee	Dec. 31, 2019 USD ($)
Summary of accrued liabilities activity related to workforce reductions
Accrued severance and benefit costs, beginning of period		$ 0
Charges		2,807
Amount paid		798
Accrued severance and benefit costs, end of period		2,009
October 2019 Reduction
Workforce Reduction
Reduction in workforce, number of employees \| employee	30
Summary of accrued liabilities activity related to workforce reductions
Accrued severance and benefit costs, beginning of period		0
Charges		2,807
Amount paid		798
Accrued severance and benefit costs, end of period		$ 2,009

Workforce Reduction - June 2018 and February 2019 (Details) - Ironwood workforce reductions $ in Thousands			12 Months Ended
	Feb. 07, 2019 employee	Jun. 27, 2018 employee	Dec. 31, 2019 USD ($)
Summary of accrued liabilities activity related to workforce reductions
Accrued severance and benefit costs, beginning of period			$ 565
Charges			580
Amount paid			(358)
Balance assumed by Ironwood			(787)
Accrued severance and benefit costs, end of period			0
June 2018 Reduction
Summary of accrued liabilities activity related to workforce reductions
Accrued severance and benefit costs, beginning of period			565
Amount paid			(268)
Balance assumed by Ironwood			(297)
Accrued severance and benefit costs, end of period			0
February 2019 Reduction
Summary of accrued liabilities activity related to workforce reductions
Accrued severance and benefit costs, beginning of period			0
Charges			580
Amount paid			(90)
Balance assumed by Ironwood			(490)
Accrued severance and benefit costs, end of period			$ 0
Ironwood \| June 2018 Reduction
Workforce Reduction
Reduction in workforce, number of employees \| employee		40
Ironwood \| February 2019 Reduction
Workforce Reduction
Reduction in workforce, number of employees \| employee	35

Subsequent Events (Details) $ in Millions	Feb. 28, 2020 USD ($)	Jan. 31, 2020 USD ($) ft²	Dec. 31, 2019 USD ($)
Subsequent Event [Line Items]
Short term restricted cash			$ 2.7
Short term restricted cash, Balance sheet location			us-gaap:OtherAssetsCurrent
Subsequent Event
Subsequent Event [Line Items]
Reduction in remaining lease payments	$ 41.9
Subsequent Event \| Office and laboratory space, lease amendment
Subsequent Event [Line Items]
Portion of leased space terminated (in square feet) \| ft²		40,000
Portion of leased space, continued under lease (in square feet) \| ft²		74,000
Termination fee		$ 6.3