What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-04 compared with 2024-03-05 · 79 added, 50 removed, 131 unchanged (50% of the section changed)

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As a result of many factors, such as those referenced or set forth under “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in Item 1A of this Annual Report on Form 10‑K, our actual results may differ materially from those anticipated in these forward‑looking statements.

We operate in one reportable business segment—human therapeutics.

At inception, Cyclerion was a biopharmaceutical company focused on the treatment of serious diseases with novel soluble guanylate cyclase (“sGC”) stimulators in both the central nervous system (“CNS”) and the periphery.

The nitric oxide (“NO”) sGC cyclic guanosine monophosphate (“cGMP”) signaling pathway is a fundamental mechanism that precisely controls key aspects of physiology throughout the body.

The NO-sGC-cGMP pathway regulates diverse and critical biological functions in both the CNS and the periphery and has been successfully targeted with several drugs.

Prior to the sale of two assets to Tisento (see below), Cyclerion’s portfolio included novel sGC stimulators that modulate signaling networks in both the CNS and the periphery.

On July 28, 2023, we sold two of our CNS assets (zagociguat and CY3018, or the “Transferred Assets”) to Tisento in exchange for $8.0 million in cash consideration, $2.4 million as reimbursement for certain operating expenses related to zagociguat and CY3018 for the period between signing and closing of the transaction, and 10% of all of Tisento's parent's outstanding equity securities.

The Cyclerion assets that were retained are olinciguat and praliciguat which are not CNS focused and are either currently out-licensed (praliciguat) or management plans to out-license (olinciguat).

We have shifted our strategy to identify non-sGC stimulator assets, within the CNS therapeutic area, to build a new portfolio.

If the Company identifies suitable new assets the Company will seek to develop the new assets and retain contract research, development and manufacturing organizations for these specific purposes, as well as seek to raise funds for further research and development activities in a fit for purpose way.

The Company’s goal is to find the best combination of capital, capabilities, and transactions that will enable the advancement of current and any future assets the Company may acquire for patients in a way that maximizes shareholder value.

Cyclerion continues to evaluate other activities aimed at enhancing shareholder value, which may potentially include collaborations, licenses, mergers, acquisitions and/or other targeted investments.

Our strategy for Cyclerion is to build a new pipeline with therapeutics to treat certain neuropsychiatric diseases.

Over the past year, Cyclerion’s diligence team which is composed of committed external experts and internal personnel in their respective fields, have been conducting asset evaluations in many therapeutic areas.

Throughout this process, the team identified and assessed dozens of products and other opportunities directed at addressing patient’s needs and increasing shareholder value.

The team prioritized an individualized therapy for treatment resistant depression (“TRD”) as our foundational product candidate and we have entered into a non-binding option to license agreement for the intellectual property associated with this product.

With the large unmet medical need in TRD, the clinical development stage of this asset, and the strong commercial opportunity, we believe that this product is well suited to be the foundation moving forward for Cyclerion.

The program team is currently developing an integrated development and commercial strategy in TRD.

In addition to significantly reducing operating expenses and the potential to obtain revenues from our legacy soluble guanylate cyclase (sGC) stimulator clinical assets, we intend to raise funds to support the execution of the product plans in TRD.

As such, we have developed a financing strategy plan and recently filed a registration statement on Form S-3 (the “Shelf Registration”) with the Securities and Exchange Commission (the “SEC”) which would allow us to sell registered shares of our common stock if we choose to do so.

The Shelf Registration was declared effective by the SEC in February 2025.

We continue to build our infrastructure, and Regina Graul, Ph.D.

was promoted to Chief Executive Officer (CEO) and Director to our Board in August of 2024 after she was hired as President in late 2023.

Graul has significant experience in research and development, product search and evaluation and has extensive knowledge growing and leading integrated high-functioning teams.

We also hired Chief Financial Officer, Rhonda Chicko, who has extensive experience working with early and later-stage drug development companies.

To limit our operating expenses, we have used consultants rather than hiring additional full-time employees;

Graul is the only current employee to date.

Our goal is to hire additional C-suite executives later this year.

Financial Overview

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Praliciguat is an orally administered, once-daily systemic sGC stimulator.

On June 3, 2021, we entered into a license agreement with Akebia relating to the exclusive worldwide license to Akebia of our rights to the development, manufacture, medical affairs and commercialization of pharmaceutical products containing praliciguat

and other related products and forms thereof enumerated in such agreement.

Cyclerion is eligible to receive up to $585 million in total potential future development, regulatory, and commercialization milestone payments.

Cyclerion is also eligible to receive tiered, sales-based royalties ranging from single-digit to high-teen percentages and subject to reduction upon expiration of patent rights or the launch of a generic product.

Olinciguat is a Phase 2, orally administered, once-daily, vascular sGC stimulator that we are seeking to out-license to an entity with strong cardiovascular and/or cardiopulmonary capabilities.

On December 13, 2024, we announced that Cyclerion and Akebia re-negotiated a mutually beneficial amendment to Akebia's exclusive license agreement for praliciguat.

Under this new license amendment, we will receive $1.75 million in amendment payments, of which $1.25 million was paid in December 2024 and an additional payment of $0.5 million is due in September 2025.

In addition, Akebia is responsible for all intellectual property expenses associated with praliciguat at an earlier date than as originally agreed between the parties.

We are eligible to receive additional milestone cash payments of up to approximately $558.5 million in total related to potential future development, regulatory, and commercialization milestone payments for praliciguat.

In exchange for a reduction in certain development milestone payments, we are eligible to receive certain higher-tiered sales-based royalties ranging from mid-single-digits to twenty percent.

In 2021, Akebia paid a $3.0 million upfront payment to us upon signing of the Akebia License Agreement, and subsequently paid us an additional $1.25 million in December 2024 and is obligated to pay us an additional $0.5 million in September 2025.

Olinciguat is a Phase 2, orally administered, once-daily, vascular sGC stimulator.

On July 22, 2024, we entered into an Option to License Agreement (the “Option Agreement”) with a third party (the “Optionee”), pursuant to which the Optionee has an option (the “Option”) to enter into an exclusive license to olinciguat for human therapeutics, subject to certain carveouts.

Under the terms of the Option Agreement, the Optionee paid us an Option fee of $150,000 in August 2024.

The Optionee may exercise the Option on or before March 20, 2025, which may be extended for an additional two-month period for an additional fee of $25,000.

If the Optionee exercises the Option during the Option Period, the Parties shall promptly commence negotiations of the definitive license agreement.

The terms of the license agreement will be negotiated in good faith within a period not to exceed 90 days after the date of exercise of the Option.

If the parties cannot reach agreement, all rights revert to us.

In addition, the Optionee has agreed to reimburse us for certain patent expenses incurred during the Option period.

Zagociguat and CY3018 are orally administered CNS-penetrant sGC stimulators.

On July 28, 2023, Tisento purchased zagociguat and CY3018 in exchange for $8.0 million in cash consideration, $2.4 million as reimbursement for certain operating expenses related to zagociguat and CY3018 for the period between signing and closing of the transaction, and 10% of all of Tisento Parent's outstanding equity securities at the time of closing.

Cyclerion continues to evaluate other activities aimed at enhancing shareholder value, which may potentially include collaborations, licenses, mergers, acquisitions, and/or other targeted investments.

The following table summarizes our research and development expenses of continuing operations, employee and facility related costs allocated to research and development expense, and discovery and pre-clinical phase programs, for the years ended December 31, 2023 and 2022.

Research and development expenses decreased significantly after July 28, 2023, due to sale of the Transferred Assets which resulted in a reduction of research and development efforts.

We continue to evaluate other activities aimed at enhancing shareholder value, which may potentially include collaborations, licenses, mergers, acquisitions, and/or other targeted investments.

The product pipeline expenses related primarily to external costs associated with nonclinical studies and clinical trial costs.

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General and Administrative Expense.

General and administrative expenses consist primarily of compensation, benefits and other employee-related expenses for personnel in our administrative, finance, legal, information technology, business development, and human resource functions.

Other costs include the legal costs of pursuing patent protection of our intellectual property, general and administrative related facility costs, insurance

costs and professional fees for accounting and legal services.

General and administrative expenses consist primarily of compensation, benefits and other employee and non-employee related expenses for personnel in our administrative, finance, legal, information technology, business development, and human resource functions.

Other costs include the legal costs of pursuing patent protection of our intellectual property, general and administrative related facility costs, insurance costs and professional fees for accounting and legal services.

We record all general and administrative expenses as incurred.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements prepared in accordance with GAAP.

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements prepared in accordance with U.S.

generally accepted accounting principles ("GAAP").

The preparation of these financial statements requires us to make certain estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the amounts of expenses during the reported periods.

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(dollars in thousands)

Revenue from development agreement

Revenue from license agreement

Option to license revenue

Total revenues

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Loss from operations

Interest and other income, net

Other income, net

Interest income

Gain from settlement of account payable

Total other income, net

Net loss from continuing operations

Discontinued operations:

Gain (loss) from discontinued operations

The decrease in revenue of approximately $0.3 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 can be attributed to approximately $0.3 million of revenue generated from the Akebia Supply Agreement in the year ended December 31, 2022.

There is no revenue recognized related to the Akebia Supply Agreement in the year ended December 31, 2023.

Gain from discontinued operations

On July 22, 2024, we entered into the Option Agreement with the Optionee, which the Optionee has the Option to enter into an exclusive license to olinciguat for human therapeutics, subject to certain carveouts.

We recognized revenue of $0.2 million related to the Option fee payment and expense reimbursement during the year ended December 31, 2024.

On December 13, 2024, we entered into the Amendment with Akebia and an amendment providing for payments aggregating $1.75 million all of which was recognized in revenue during the year ended December 31, 2024.

$1.25 million of this amount was paid in December 2024 and the remaining $0.5 million is payable in September 2025.

Research and development expenses.

The decrease in research and development expenses of approximately $4.5 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 was driven by decreases of approximately $3.0 million in salaries and other employee-related expenses including non-cash stock-based compensation, approximately $0.2 million in information technology services, approximately $0.3 million in consulting and outside service fee and approximately $0.7 million in external research costs related to discovery research.

The decrease in research and development expenses of approximately $1.2 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 was driven by decreases of approximately $0.5 million in employee-related expenses primarily due to the workforce reduction in 2023, approximately $0.2 million in information technology services savings, approximately $0.1 million in research study cost savings, approximately $0.1 million in reduced outside service fees, approximately $0.2 million in lab equipment and service savings and approximately $0.1 million in lab space rent.

General and administrative expenses.

The decrease in general and administrative expenses of approximately $4.7 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by decreases of approximately $3.7 million in salaries and other employee-related expenses including non-cash stock-based compensation, approximately $0.4 million in amortization of insurance policies, approximately $0.3 million in board member fees and approximately $0.3 million in rent expenses.

The decrease in general and administrative expenses of approximately $2.8 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily driven by decreases of approximately $0.4 million in employee-related expenses primarily due to the workforce reduction in 2023, approximately $1.5 million in savings in legal services, approximately $0.4 million in audit and tax services, approximately $0.2 million in outside services, reductions of $0.4 million in insurance expenses and approximately $0.3 million in information technology services, which were partially offset by an increase of approximately $0.5 million in professional consulting.

Impairment loss.

The impairment loss consists of an impairment loss of operating lease of approximately $3.3 million during the year ended December 31, 2023.

There was no impairment loss recognized during the year ended December 31, 2022.

Gain (loss) from discontinued operations.

The operations related to the Transferred Assets to Tisento are presented as discontinued operations for all periods presented.

The increase in gain from discontinued operations of approximately $33.2 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 was driven by the one-time gain of sale of approximately $15.8 million, and approximately $21.1 million decrease of research and development expense, offset by $2.4 million increase in general and administrative expenses due to closing and transaction costs related to the disposal incurred during the year ended December 31, 2023.

The decrease in research and development expense included approximately $14.9 million decrease in external research costs in related to zagociguat clinical trials and CY3018 costs, approximately $4.9 million decrease in salaries and other employee-related expenses and approximately $1.3 million decrease in consulting expense.

The impairment loss consists of an impairment of an operating lease of approximately $3.3 million during the year ended December 31, 2023.

There was no impairment loss recognized during the year ended December 31, 2024, as the right-of-use asset was fully impaired as of December 31, 2023.

Gain from discontinued operations.

The decrease in gain from discontinued operations of approximately $7.3 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, was driven by the sale of Transferred Assets in July 2023.

After the sale of Transferred Assets, no discontinued operation was recognized in the statement of operations and comprehensive loss.

Interest and other income, net.

Interest and other income increased by approximately $0.1 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 due to an increase of approximately $0.1 million in interest income driven by higher interest rates.

Interest and other income decreased by approximately $0.2 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily attributable to the decrease in our money market fund balance.

Liquidity and Capital Resources

On July 24, 2020, the Company filed a Registration Statement on Form S-3 (the “Shelf”) with the Securities and Exchange Commission (the “SEC”) in relation to the registration of common stock, preferred stock, debt securities, warrants and units of any combination thereof for an aggregate initial offering price not to exceed $150.0 million.

To date, we have been funded primarily from sales of our equity securities, payments received in connection with the sale of assets to Tisento, milestone payments from Akebia and an option to license payment.

On July 24, 2020, we filed a Registration Statement on Form S-3 (the “2020 Shelf”) with the Securities and Exchange Commission (the “SEC”) in relation to the registration of common stock, preferred stock, debt securities, warrants and units of any combination thereof for an aggregate initial offering price not to exceed $150.0 million.

On September 3, 2020, we entered into the Sales Agreement with Jefferies with respect to the ATM Offering under the 2020 Shelf.

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We did not sell any shares of our common stock under the Shelf in 2022 or 2023.

On February 4, 2025, we filed a Registration Statement on Form S-3 (the “2025 Shelf”) with the securities and Exchange Commission (the “SEC”) in relation to the registration of common stock, preferred stock, warrants and units of any combination thereof for an aggregate initial offering price not to exceed $25.0 million.

The amount we can sell under the 2025 Shelf, which was declared effective in February 2025, cannot exceed one-third of the value of our public float.

On May 19, 2023, we sold 225,000 shares of our common stock, pursuant to a Common Stock Purchase Agreement, and 351,037 shares of Series A Preferred Stock, to our former CEO, for total gross proceeds of approximately $5 million.

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The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that these consolidated financial statements are issued.

In performing our analysis, management excluded certain elements of our operating plan that cannot be considered probable.

performing our analysis, management excluded certain elements of our operating plan that cannot be considered probable.

Under ASC 205-40, the future receipt of potential funding from future partnerships, equity or debt issuances, and the potential milestones from the Akebia agreement cannot be considered probable at this time because these plans are not entirely within our control and/or have not been approved by the Board of Directors as of the date of these consolidated financial statements.

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In addition, as of December 31, 2024, we had an accumulated deficit of $267.5 million.

We expect that our cash, cash equivalents and marketable securities as of December 31, 2023, will be sufficient to fund operations through the first quarter of 2025, however we will need to obtain additional funding to sustain operations as we expect to continue to generate operating losses for the foreseeable future.

We expect that our cash and cash equivalents as of December 31, 2024, will be sufficient to fund operations through mid-2025, however we will need to obtain additional funding to sustain operations as we expect to continue to generate operating losses for the foreseeable future.

Accordingly, we have concluded that substantial doubt exists about our ability to continue as a going concern.

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Cash Flows from Operating Activities

Net cash used in operating activities was $21.2 million for the year ended December 31, 2023 compared to $40.6 million for the year ended December 31, 2022.

The decrease in net cash used in operations of $19.4 million primarily relates to a decrease of approximately $38.8 million in our net loss, which is in part due to an increase of approximately $15.8 million in gain on disposal of discontinued operations, a reduction of approximately $5.2 million in stock-based compensation and offset by an increase of approximately $3.3 million in impairment loss.

Change in working capital accounts resulted in an approximately $1.8 million use of cash.

Net cash used in operating activities was $4.3 million for the year ended December 31, 2024 was primarily a result of our $3.1 million net loss from operations.

The net loss was also adjusted by gain from settlement of accounts payable of $0.4 million, an increase in accounts receivable of $0.6 million, a decrease in accounts payable, accrued expenses and other current liabilities of $1.0 million.

The net loss was offset by non-cash stock-based compensation expense of $0.6 million.

Net cash used in operating activities was $21.2 million for the year ended December 31, 2023 was primarily a result of our $5.3 million net loss from operations.

The net loss was adjusted by gain on disposal of discontinued operations of $15.8 million, a decrease in accounts payable of $1.8 million, a decrease in accrued research and development costs of $2.2 million and a decrease in accrued expenses and other current liabilities of $1.6 million.

The net loss was also offset by impairment loss of $3.3 million, non-cash stock-based compensation expense of $1.1 million, a decrease in account receivable of $0.1 million, a decrease in prepaid expenses of $0.4 million, a decrease in other current assets of $0.2 million, a decrease in operating lease assets of $0.1 million and a decrease in other assets of $0.2 million.

Cash Flows from Investing Activities

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Net cash provided by financing activities for the year ended December 31, 2023 of $5.0 million was due to cash received from the May 2023 stock purchase agreement of $5.0 million.

There was a de minimis amount of financing activity in the year ended December 31, 2022.

There was no financing activity incurred during the year ended December 31, 2024.

Funding Requirements

We expect our expenses to fluctuate as we continue to maintain out-license opportunities and seek to broaden our portfolio through in-licensing of complementary CNS assets.

Failure to obtain necessary capital when needed may delay development of any current or potential future product candidates, or other operations.

We expect that our cash and cash equivalents as of December 31, 2024, will be sufficient to fund operations through mid-2025.

As a result, we will need to obtain additional funding to sustain operations as we expect to continue to generate operating losses for the foreseeable future.

Failure to obtain necessary capital when needed may delay development of any current or potential future product candidates, or our operations.

Because of the many risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount of our working capital requirements.

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A change in any of these or other variables with respect to the development of any current or potential future product candidates could significantly change the costs and timing of the development of that product candidate.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances

or licensing arrangements with third parties, of which there can be no assurance.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, outstanding equity ownership may be materially diluted, and the terms of securities sold in such transactions could include liquidation or other preferences that adversely affect the rights of holders of common stock.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, outstanding equity ownership may be materially diluted, and the terms of securities sold in such transactions could include liquidation and other preferences and rights that adversely affect the rights of holders of common stock.

Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specified actions, such as incurring additional debt, making capital expenditures or declaring dividends.

In addition, debt financing would result in increased fixed payment obligations.

If we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, as to which raise there can be no assurances, we may have to relinquish rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.

research programs or product candidates or grant licenses on terms that may not be favorable to us.

If we are unable to raise funds, we may need to cease operations.

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Separation Benefits

As part of the separation benefit of former Chief Financial Officer, we shall pay to our former Chief Financial Officer a payment of $0.1 million on each of the six-month and nine-month anniversaries of November 15, 2023, in the event the former Chief Financial Officer has not secured full-time employment prior to the anniversary date.

As part of the separation benefit of the former Chief Financial Officer, we paid $0.1 million each in May 2024 and August 2024, as the former Chief Financial Officer had not secured full-time employment prior to the six-month anniversary and nine-month anniversary of November 15, 2023.

We have no further separation benefits obligation as of December 31, 2024.

Off-Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis