10-Q
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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, 2023

or

 

 

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 Capital Market LLC

 

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 9, 2023, the registrant had 2,445,096 shares of common stock, no par value, outstanding.

 


 

CYCLERION PHARMACEUTICALS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2023

TABLE OF CONTENTS

 

Page

PART I — FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited)

5

Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022

5

Condensed Consolidated Statements of Operations and Comprehensive Loss for Three and Nine Months Ended September 30, 2023 and 2022

6

Condensed Consolidated Statements of Stockholders’ Equity for Three and Nine Months Ended September 30, 2023 and 2022

7

Condensed Consolidated Statements of Cash Flows for Nine Months Ended September 30, 2023 and 2022

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

30

Item 4.

Controls and Procedures

30

 

PART II — OTHER INFORMATION

 

Item 1.

Legal Proceedings

31

Item 1A.

Risk Factors

31

Item 5.

Other Information

31

Item 6.

Exhibits

31

Signatures

33

 

 

 

 


 

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:

there is substantial doubt regarding our ability to continue as a going concern;
the timing, investment and associated activities involved in developing, obtaining regulatory approval for, launching and commercializing any current or future product candidates;
the uncertainty as to any liquidity or monetizable value of our equity interest in Tisento, which faces all the risks of an early-stage pharmaceutical development company;
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 agreements of our product candidates;
our ability to access capital, capabilities, and transactions necessary to advance the development of our assets;
whether the praliciguat out-license will result in the creation of any therapies;
whether any development, regulatory, and commercialization milestones or royalty payments provided for in the agreement with Akebia (as defined below in Note 1 to the Condensed Consolidated Financial Statements) will be achieved;
the impact on our business of workforce and expense reduction initiatives;
a determination that we constitute an investment company under the Investment Company Act of 1940, as amended, and if we are required to register thereunder, would have a material adverse effect on us;
our or our partners' plans with respect to the development, manufacture or sale of any current or future 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 any current or future product candidates;
the efficacy and perceived therapeutic benefits of any current or future product candidates, their potential indications and their market potential;

 

3


 

U.S. and non-U.S. regulatory requirements for any current or future product candidates, including any post-approval development and regulatory requirements, and the ability of any current or future 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, and concentration of voting control, as well as the timing and drivers thereof, and our ability to maintain effective 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 any current or future product candidates;
the impact of government regulation in the life sciences industry, particularly with respect to healthcare reform;
the potential we could be delisted from Nasdaq;
trends and challenges in the markets for our potential products.

See the “Risk Factors” section in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and in our Quarterly Report on Form 10-Q for the period ended June 30, 2023 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.

 

4


 

Cyclerion Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(In thousands except share data)

(Unaudited)

 

 

 

September 30,
2023

 

 

December 31,
2022

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

9,108

 

 

$

13,382

 

Accounts receivable

 

 

 

 

 

96

 

Prepaid expenses

 

 

726

 

 

 

805

 

Other current assets

 

 

30

 

 

 

537

 

Total current assets

 

 

9,864

 

 

 

14,820

 

Operating lease right-of-use asset

 

 

 

 

 

1,218

 

Other investment

 

 

5,350

 

 

 

 

Other assets

 

 

 

 

 

2,041

 

Total assets

 

$

15,214

 

 

$

18,079

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

814

 

 

$

2,970

 

Accrued research and development costs

 

 

362

 

 

 

2,275

 

Accrued expenses and other current liabilities

 

 

1,165

 

 

 

2,382

 

Total current liabilities

 

 

2,341

 

 

 

7,627

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 Preferred shares, no par value, 500,000 shares authorized and 351,037 series A convertible preferred stock issued and outstanding at September 30, 2023

 

 

 

 

 

 

Common stock, no par value, 20,000,000 shares authorized and 2,445,096 issued and outstanding at September 30, 2023 and 20,000,000 shares authorized and 2,175,936 issued and outstanding at December 31, 2022 (*)

 

 

 

 

 

 

Paid-in capital

 

 

275,614

 

 

 

269,626

 

Accumulated deficit

 

 

(262,723

)

 

 

(259,154

)

Accumulated other comprehensive loss

 

 

(18

)

 

 

(20

)

Total stockholders' equity

 

 

12,873

 

 

 

10,452

 

Total liabilities and stockholders' equity

 

$

15,214

 

 

$

18,079

 

 

*Adjusted retroactively for reverse stock split - see Note 1

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

 

5


 

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,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Revenue from development agreement

 

$

 

 

$

 

 

$

 

 

$

297

 

Total revenues

 

 

 

 

 

 

 

 

 

 

 

297

 

Cost and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

580

 

 

 

1,414

 

 

 

1,491

 

 

 

4,803

 

General and administrative

 

 

2,131

 

 

 

3,104

 

 

 

6,361

 

 

 

9,579

 

Impairment loss

 

 

3,304

 

 

 

 

 

 

3,304

 

 

 

 

Total cost and expenses

 

 

6,015

 

 

 

4,518

 

 

 

11,156

 

 

 

14,382

 

Loss from operations

 

 

(6,015

)

 

 

(4,518

)

 

 

(11,156

)

 

 

(14,085

)

Interest and other income, net

 

 

107

 

 

 

111

 

 

 

257

 

 

 

162

 

Net loss from continuing operations

 

 

(5,908

)

 

 

(4,407

)

 

 

(10,899

)

 

 

(13,923

)

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) from discontinued operations

 

 

13,474

 

 

 

(6,089

)

 

 

7,330

 

 

 

(22,939

)

Net gain (loss)

 

$

7,566

 

 

$

(10,496

)

 

$

(3,569

)

 

$

(36,862

)

Net gain (loss) per share - basic:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share from continuing operations - basic

 

$

(2.43

)

 

$

(2.03

)

 

$

(4.74

)

 

$

(6.41

)

Net gain (loss) per share from discontinued operations - basic

 

 

5.53

 

 

 

(2.80

)

 

 

3.19

 

 

 

(10.56

)

Basic net gain (loss) per share (*)

 

$

3.11

 

 

$

(4.83

)

 

$

(1.55

)

 

$

(16.96

)

Net gain (loss) per share - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share from continuing operations - diluted

 

$

(2.12

)

 

$

(2.03

)

 

$

(4.74

)

 

$

(6.41

)

Net gain (loss) per share from discontinued operations - diluted

 

 

4.84

 

 

 

(2.80

)

 

 

3.19

 

 

 

(10.56

)

Diluted net gain (loss) per share (*)

 

$

2.72

 

 

$

(4.83

)

 

$

(1.55

)

 

$

(16.96

)

Weighted average shares used in calculating:

 

 

 

 

 

 

 

 

 

 

 

 

Basic shares

 

 

2,435

 

 

 

2,174

 

 

 

2,299

 

 

 

2,173

 

Diluted shares

 

 

2,786

 

 

 

2,174

 

 

 

2,299

 

 

 

2,173

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss)

 

$

7,566

 

 

$

(10,496

)

 

$

(3,569

)

 

$

(36,862

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment loss (gain)

 

 

(2

)

 

 

(3

)

 

 

2

 

 

 

(5

)

Comprehensive gain (loss)

 

$

7,564

 

 

$

(10,499

)

 

$

(3,567

)

 

$

(36,867

)

 

*Adjusted retroactively for reverse stock split - see Note 1

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

 

6


 

Cyclerion Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands except share data)

(Unaudited)

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Accumulated
other
comprehensive

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

loss

 

 

equity

 

Balance at December 31, 2021

 

 

2,170,509

 

 

$

 

 

$

263,345

 

 

$

(215,076

)

 

$

(23

)

 

$

48,246

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(12,978

)

 

 

 

 

 

(12,978

)

Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan

 

 

1,909

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan

 

 

 

 

 

 

 

 

1,476

 

 

 

 

 

 

 

 

 

1,476

 

Share‑based compensation expense related to issuance of stock options to non-employees

 

 

 

 

 

 

 

 

291

 

 

 

 

 

 

 

 

 

291

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

Balance at March 31, 2022

 

 

2,172,418

 

 

$

 

 

$

265,112

 

 

$

(228,054

)

 

$

(24

)

 

$

37,034

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(13,388

)

 

 

 

 

 

(13,388

)

Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan

 

 

1,574

 

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

17

 

Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan

 

 

 

 

 

 

 

 

1,410

 

 

 

 

 

 

 

 

 

1,410

 

Share‑based compensation expense related to issuance of stock options to non-employees

 

 

 

 

 

 

 

 

289

 

 

 

 

 

 

 

 

 

289

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

Balance at June 30, 2022

 

 

2,173,992

 

 

$

 

 

$

266,828

 

 

$

(241,442

)

 

$

(25

)

 

$

25,361

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(10,496

)

 

 

 

 

 

(10,496

)

Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan

 

 

717

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan

 

 

 

 

 

 

 

 

1,372

 

 

 

 

 

 

 

 

 

1,372

 

Share‑based compensation expense related to issuance of stock options to non-employees

 

 

 

 

 

 

 

 

290

 

 

 

 

 

 

 

 

 

290

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

(3

)

Balance at September 30, 2022

 

 

2,174,709

 

 

$

 

 

$

268,490

 

 

$

(251,938

)

 

$

(28

)

 

$

16,524

 

 

 

7


 

Cyclerion Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(In thousands except share data)

(Unaudited)

 

 

 

Common Stock (*)

 

 

Preferred Stock

 

 

Paid-in

 

 

Accumulated

 

 

Accumulated
other
comprehensive

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

loss

 

 

equity

 

Balance at December 31, 2022

 

 

2,175,936

 

 

$

 

 

 

 

 

$

 

 

$

269,626

 

 

$

(259,154

)

 

$

(20

)

 

$

10,452

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,954

)

 

 

 

 

 

(6,954

)

Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan

 

 

309

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

416

 

 

 

 

 

 

 

 

 

416

 

Share‑based compensation expense related to issuance of stock options to non-employees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

 

 

 

10

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

1

 

Balance at March 31, 2023

 

 

2,176,245

 

 

$

 

 

 

 

 

$

 

 

$

270,052

 

 

$

(266,108

)

 

$

(19

)

 

$

3,925

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,181

)

 

 

 

 

 

(4,181

)

Issuance of common stock

 

 

225,000

 

 

 

 

 

 

 

 

 

 

 

 

1,953

 

 

 

 

 

 

 

 

 

1,953

 

Issuance of preferred shares

 

 

 

 

 

 

 

 

351,037

 

 

 

 

 

 

3,047

 

 

 

 

 

 

 

 

 

3,047

 

Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan

 

 

6,618

 

 

 

 

 

 

 

 

 

 

 

 

24

 

 

 

 

 

 

 

 

 

24

 

Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

373

 

 

 

 

 

 

 

 

 

373

 

Share‑based compensation expense related to issuance of stock options to non-employees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

3

 

Fractional shares issuance

 

 

(67

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2023

 

 

2,407,796

 

 

$

 

 

 

351,037

 

 

$

 

 

$

275,455

 

 

$

(270,289

)

 

$

(16

)

 

$

5,150

 

Net gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,566

 

 

 

 

 

 

7,566

 

Issuance of common stock upon vesting of RSUs

 

 

37,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense related to issuance of stock options and RSUs to employees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

154

 

 

 

 

 

 

 

 

 

154

 

Share‑based compensation expense related to issuance of stock options to non-employees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

5

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

(2

)

Balance at September 30, 2023

 

 

2,445,096

 

 

$

 

 

 

351,037

 

 

$

 

 

$

275,614

 

 

$

(262,723

)

 

$

(18

)

 

$

12,873

 

 

*Adjusted retroactively for reverse stock split - see Note 1

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

 

8


 

Cyclerion Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows