SEC Filing | Cyclerion Therapeutics, Inc.

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


	☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


	☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-38787

CYCLERION THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)


Massachusetts (State or other jurisdiction of incorporation or organization)		83-1895370 (I.R.S. Employer Identification No.)

245 First Street, 18th Floor, Cambridge, Massachusetts (Address of principal executive offices)		02142 (Zip Code)

(857) 327-8778

Registrant’s Telephone Number, Including Area Code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	CYCN	The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐		Accelerated filer ☐

Non-accelerated filer ☒		Smaller reporting company ☒

		Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 5, 2021, the registrant had 43,315,745 shares of common stock, no par value, outstanding.

CYCLERION PHARMACEUTICALS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS


		Page
	PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets as of September 30, 2021, and December 31, 2020	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss for Three and Nine Months Ended September 30, 2021, and 2020	6
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for Three and Nine Months Ended September 30, 2021, and 2020	7
	Condensed Consolidated Statements of Cash Flows for Three and Nine Months Ended September 30, 2021, and 2020	9
	Notes to the Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31

	PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 5.	Other Information	32
Item 6.	Exhibits	32
	Signatures	34

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. All statements in this report, other than statements of historical facts, including statements about future events, financing plans, financial position, business strategy, budgets, projected costs, plans and objectives of management for future operations, are forward-looking statements that involve certain risks and uncertainties. Use of the words “may,” “might,” “will,” “would,” “could,” “should,” “believes,” “estimates,” “projects,” “potential,” “expects,” “plans,” “seeks,” “intends,” “evaluates,” “pursues,” “anticipates,” “continues,” “designs,” “impacts,” “affects,” “forecasts,” “target,” “outlook,” “initiative,” “objective,” “designed,” “priorities,” “goal” or the negative of those words or other similar expressions may identify forward-looking statements that represent our current judgment about possible future events, but the absence of these words does not necessarily mean that a statement is not forward-looking.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national, or global political, economic, business, competitive, market and regulatory conditions and the following:



the timing, investment and associated activities involved in developing, obtaining regulatory approval for, launching and commercializing our product candidates, including CY6463;



the coronavirus (“COVID-19”) pandemic affecting our clinical trials and other operating activities;



our relationships with third parties, collaborators and our employees;



our ability to execute our strategic priorities;



our ability to finance our operations and business initiatives;



the success of collaboration or license arrangements of our product candidates;



whether the praliciguat out-license will result in the creation of any therapies for the treatment of patients with kidney disease;



whether any development, regulatory, and commercialization milestones or royalty payments provided for in the agreement with Akebia (as defined below) will be achieved;



the impact on our business of workforce and expense reduction initiatives;



our plans with respect to the development, manufacture or sale of our product candidates and the associated timing thereof, including the design and results of pre-clinical and clinical studies;



the safety profile and related adverse events of our product candidates;



the efficacy and perceived therapeutic benefits of our product candidates, their potential indications and their market potential;



U.S. and non-U.S. regulatory requirements for our product candidates, including any post-approval development and regulatory requirements, and the ability of our product candidates to meet such requirements;



our ability to attract and retain employees needed to execute our business plans and strategies and our ability to manage the impact of any loss of key employees;



our ability to obtain and maintain intellectual property protection for our product candidates and the strength thereof;



our future financial performance, revenues, expense levels, payments, cash flows, profitability, tax obligations, capital raising and liquidity sources, real estate needs and concentration of voting control, as well as the timing and drivers thereof, and internal control over financial reporting;



our ability to compete with other companies that are or may be developing or selling products that are competitive with our product candidates;



the impact of government regulation in the life sciences industry, particularly with respect to healthcare reform;



potential indemnification liabilities we may owe to Ironwood after the Separation (as defined below); and



trends and challenges in the markets for our potential products.

See the “Risk Factors” section in Item 1A of our annual report on Form 10-K for the fiscal year ended December 31, 2020, and elsewhere in this Quarterly Report on Form 10-Q for a further description of these and other factors. We caution you that the risks, uncertainties, and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits, or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. There can be no assurance that (i) we have correctly measured or identified all of the factors affecting our business or the extent of these factors’ likely impact, (ii) the available information with respect to these factors on which such analysis is based is complete or accurate, (iii) such analysis is correct or (iv) our strategy, which is based in part on this analysis, will be successful. All forward-looking statements in this report apply only as of the date of this report or as of the date they were made and, except as required by applicable law, we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

Cyclerion Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(In thousands except share and per share data)

(Unaudited)


	September 30, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	62,503		$	54,395
Accounts receivable		158			—
Related party accounts receivable		—			127
Prepaid expenses		562			816
Other current assets		459			3,163
Total current assets		63,682			58,501
Restricted cash, net of current portion		—			3,837
Property and equipment, net		112			6,865
Operating lease right-of-use asset		1,449			43,402
Other assets		2,499			2,773
Total assets	$	67,742		$	115,378
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,174		$	1,149
Related party accounts payable		—			286
Accrued research and development costs		3,432			1,421
Accrued expenses and other current liabilities		3,240			7,294
Short-term note payable		3,509			3,509
Current portion of operating lease liabilities		—			3,293
Total current liabilities		11,355			16,952
Operating lease liabilities, net of current portion		—			38,933
Commitments and contingencies		—			—
Stockholders' equity
Common stock, no par value, 400,000,000 shares authorized and 43,310,089 issued and outstanding at September 30, 2021 and 400,000,000 shares authorized and 34,047,300 issued and outstanding at December 31, 2020		—			—
Accumulated deficit		(204,300	)		(163,429	)
Paid-in capital		260,713			222,949
Accumulated other comprehensive loss		(26	)		(27	)
Total stockholders' equity		56,387			59,493
Total liabilities and stockholders' equity	$	67,742		$	115,378

The accompanying notes are an integral part of these condensed consolidated financial statements.

Cyclerion Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands except per share data)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenues:
Revenue from license agreement	$	0		$	—		$	3,000		$	—
Revenue from development agreement		77			—			138			—
Revenue from related party		—			400			—			2,163
Revenue from grants		271			—			271			—
Total revenues		348			400			3,409			2,163
Cost and expenses:
Research and development		7,032			13,703			27,178			44,322
General and administrative		4,601			8,033			16,207			21,551
(Gain) / loss on lease modification and termination		—			444			881			(1,669	)
Total cost and expenses		11,633			22,180			44,266			64,204
Loss from operations		(11,285	)		(21,780	)		(40,857	)		(62,041	)
Sublease termination income, net		—			2,875			—			2,875
Interest and other income (expenses), net		(5	)		93			(15	)		592
Net loss	$	(11,290	)	$	(18,812	)	$	(40,872	)	$	(58,574	)
Net loss per share:
Basic and diluted net loss per share	$	(0.26	)	$	(0.59	)	$	(1.08	)	$	(2.01	)
Weighted average shares used in calculating:
Basic and diluted net loss per share		43,291			32,096			37,730			29,196

Other comprehensive loss:
Net loss	$	(11,290	)	$	(18,812	)	$	(40,872	)	$	(58,574	)
Other comprehensive loss:
Foreign currency translation adjustment (loss) gain		—			3			1			(7	)
Comprehensive loss	$	(11,290	)	$	(18,809	)	$	(40,871	)	$	(58,581	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Cyclerion Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(In thousands except share data)

(Unaudited)


	Common Stock				Paid-in		Accumulated			Accumulated other comprehensive			Total Stockholders’
	Shares		Amount		capital		deficit			loss			equity (deficit)
Balance at December 31, 2019		27,598,133	$	—	$	183,376	$	(85,627	)	$	(20	)	$	97,729
Net loss		—		—		—		(20,228	)		—			(20,228	)
Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan		156,761		—		1					—			1
Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan		—		—		4,036					—			4,036
Foreign currency translation adjustment											2			2
Balance at March 31, 2020		27,754,894	$	—	$	187,413	$	(105,855	)	$	(18	)	$	81,540
Net loss		—		—		—		(19,534	)		—			(19,534	)
Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan		102,816		—		155		—			—			155
Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan		—		—		3,952		—			—			3,952
Foreign currency translation adjustment								—			(12	)		(12	)
Balance at June 30, 2020		27,857,710	$	—	$	191,520	$	(125,389	)	$	(30	)	$	66,101
Net loss		—		—		—		(18,812	)		—			(18,812	)
Issuance of common stock - 2020 private placement		6,062,500		—		24,250		—			—			24,250
Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan		41,345		—		16		—			—			16
Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan		—		—		3,796		—			—			3,796
Foreign currency translation adjustment		—		—		—		—			3			3
Balance at September 30, 2020		33,961,555	$	—	$	219,582	$	(144,201	)	$	(27	)	$	75,354

Cyclerion Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(In thousands except share data)

(Unaudited)


	Common Stock				Paid-in		Accumulated			Accumulated other comprehensive			Total Stockholders’
	Shares		Amount		capital		deficit			loss			equity (deficit)
Balance at December 31, 2020		34,047,300	$	—	$	222,949	$	(163,429	)	$	(27	)	$	59,493
Net loss		—		—		—		(13,399	)		—			(13,399	)
Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan		82,625		—		27		—			—			27
Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan		—		—		1,921		—			—			1,921
Share‑based compensation expense related to issuance of stock options to non-employees		—		—		391		—			—			391
Foreign currency translation adjustment		—		—		—		—			—			—
Balance at March 31, 2021		34,129,925	$	—	$	225,288	$	(176,828	)	$	(27	)	$	48,433
Net loss		—		—		—		(16,182	)		—			(16,182	)
Issuance of common stock - June 2021 equity private placement and ATM		9,087,547		—		30,497		—			—			30,497
Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan		57,777		—		133		—			—			133
Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan		—		—		1,942		—			—			1,942
Share‑based compensation expense related to issuance of stock options and RSUs to non-employees		—		—		398		—			—			398
Foreign currency translation adjustment		—		—		—		—			1			1
Balance at June 30, 2021		43,275,249	$	—	$	258,258	$	(193,010	)	$	(26	)	$	65,222
Net loss		—		—		—		(11,290	)		—			(11,290	)
Issuance of common stock - ATM		1,500		—		6		—			—			6
Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan		33,340		—		37		—			—			37
Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan		—		—		2,018		—			—			2,018
Share‑based compensation expense related to issuance of stock options and RSUs to non-employees		—		—		394		—			—			394
Foreign currency translation adjustment		—		—		—		—			—			—
Balance at September 30, 2021		43,310,089	$	—	$	260,713	$	(204,300	)	$	(26	)	$	56,387

The accompanying notes are an integral part of these condensed consolidated financial statements.

Cyclerion Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(40,872	)	$	(58,574	)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Depreciation and amortization		424			1,827
Net loss on disposal of property and equipment		6,322			205
(Gain) / loss on lease modification and termination		881			(1,669	)
Sublease termination income, net		—			(2,875	)
Share-based compensation expense		7,064			11,785
Changes in operating assets and liabilities:
Accounts receivable		(158	)		—
Related party accounts receivable		127			1,074
Prepaid expenses		254			748
Other current assets		1,254			(8	)
Operating lease assets		(105	)		(3,592	)
Other assets		274			(979	)
Accounts payable		25			(1,094	)
Related party accounts payable		(286	)		414
Accrued research and development costs		2,011			(38