UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
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, 18 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
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect
the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of
the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the common stock held by non-affiliates of the registrant, as of June 30, 2024, the last business day of the registrant’s most recently completed second fiscal
quarter, was approximately $4.8 million, computed using the closing price on that day of $2.30.
As of February 28, 2025, there were 2,710,096 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement, to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, for its 2025 Annual Meeting of Stockholders are
incorporated by reference in Part III of this Form 10-K.
th
2
TABLE OF CONTENTS
PART I
Item 1.
Business.
5
Item 1A.
Risk Factors.
18
Item 1B.
Unresolved Staff Comments.
49
Item 1C.
Cybersecurity
49
Item 2.
Properties
50
Item 3.
Legal Proceedings
51
Item 4.
Mine Safety Disclosures.
51
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
52
Item 6.
Selected Financial Data.
52
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
53
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.
60
Item 8.
Financial Statements and Supplementary Data.
60
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
60
Item 9A.
Controls and Procedures.
60
Item 9B.
Other Information.
62
Item 9C.
Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.
62
PART III
Item 10.
Directors, Executive Officers and Corporate Governance.
63
Item 11.
Executive Compensation.
63
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
63
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
63
Item 14.
Principal Accounting Fees and Services.
63
PART IV
Item 15.
Exhibits, Financial Statement Schedules.
64
Item 16.
Form 10-K Summary.
65
3
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, or this Annual Report, contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that involve substantial
risks and uncertainties. The forward-looking statements are contained principally in Part I, Item 1. “Business,” Part I, Item 1A. “Risk Factors,” and Part II,
Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but are also contained elsewhere in this Annual
Report. In some cases, you can identify forward-looking statements by 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:
•
We are currently considering a new potential product candidate and we may not be successful in acquiring license and other rights necessary to
develop this technology, establish and successfully complete clinical studies, obtain necessary regulatory governmental approvals and
successfully commercialize this product candidate;
•
there is substantial doubt regarding our ability to continue as a going concern and we will need to raise capital in the near term in order to
maintain our operations;
•
we may be unable to access capital, capabilities, and transactions necessary to advance the development of the product candidate under
evaluation and any future product candidates;
•
there is substantial uncertainty regarding our future financial performance, potential revenues, expense levels, payments, cash flows, profitability,
tax obligations, concentration of voting control, as well as the timing and drivers thereof;
•
there is uncertainty regarding the impact of government funding and regulation in the life sciences industry, particularly with regard to funding
for new drug development, staffing levels at government agencies and healthcare reform generally;
•
there may be substantial delays to timing, investment and associated activities involved in developing, obtaining regulatory approval for,
launching and commercializing the product candidate under evaluation and potential future product candidates;
•
we may be unable to maintain our relationships with third parties, collaborators and our employees or execute our strategic priorities;
•
we may fail to maintain our Nasdaq listing;
•
there are significant risks in our investment in Tisento Therapeutics Inc. (“Tisento”) tied to Tisento developing, obtaining regulatory approval
for, launching and commercializing its product candidates and such risks may negatively impact our investment in Tisento;
•
there is uncertainty regarding any liquidity or monetizable value of our equity interest in Tisento, which faces all the risks of an early-stage
pharmaceutical development company;
•
there is uncertainty as to whether any future development, regulatory, and commercialization milestones or royalty payments provided for in the
agreement with Akebia Therapeutics, Inc. will be achieved;
4
•
we are seeking to out-license our olinciguat technology to a third party which holds an option to negotiate a license to this technology and if the
third party elects not to exercise the option or if we are unable to reach agreement on license terms, we may not reach agreement on the terms of
a license arrangement;
•
our product candidates and those we have sold or out-licensed have not been approved for sale by regulatory agencies and may not prove to meet
safety and efficacy requirements and if we are unable to comply with U.S. and non-U.S. regulatory requirements, including any post-approval
development and regulatory requirements, or our potential future product candidates are unable to comply with such requirements, our operating
results may suffer;
•
we may be unable to obtain reimbursement from the U.S. government and third-party payors for potential future product candidates if and when
commercialized;
•
if we are unable to attract and retain employees needed to execute our business plans and strategies and or manage the impact of any loss of key
employees our financial condition and results of operations may suffer;
•
our business may be negatively impacted if we are unable to obtain and maintain intellectual property protection for our current and potential
future product candidates;
•
third parties may allege we infringe their intellectual property rights, which could result in adverse outcomes;
•
we may fail to maintain effective internal controls over financial reporting;
•
we may be impacted by trends and challenges in the market affecting our product candidates;
•
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, could have a material adverse effect on us;
•
we may be unable to compete with other companies that are or may be developing or selling products that are competitive with any potential
future product candidates;
•
a pandemic or natural disaster may disrupt our business, including our development activities, resulting in a material adverse effect on our
financial condition and results of operations; and
•
other factors that are described in Part 1, Item 1A “Risk Factors” of this our Annual Report on Form 10-K.
You should refer to “Item 1A. Risk Factors” in this Annual Report on Form 10-K for a discussion of important factors that may cause our actual
results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the
forward-looking statements in this Annual Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the
inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a
representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. The forward-
looking statements in this Annual Report represent our views as of the date of this Annual Report. We anticipate that subsequent events and developments
may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we undertake no
obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required
by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date following the date of this Annual
Report.
You should read this report and the documents that we reference in this report, completely and with the understanding that our actual future
results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Unless the context requires otherwise, references in this report to “Cyclerion,” the “Company,” “we,” “us,” and “our” refer to Cyclerion
Therapeutics, Inc. and, where appropriate, our consolidated subsidiaries.
5
PART I
Item 1. Business
Overview and Strategy
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. Dr. 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 retained as our 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 (including Ms. Chicko) rather than hiring additional full-time employees; Dr. Graul is the only current employee to date. Our goal is to hire
additional C-suite executives later this year.
Background
We were founded in 2018 to focus on the treatment of serious diseases with novel sGC stimulators in both the central nervous system (CNS) and
the periphery. Since that time, our strategy for Cyclerion has changed and our sGC assets zagociquat and CY3018 were sold in 2023 to Tisento, we out-
licensed praliciguat in 2021 and we have entered into a non-binding license option agreement for olinciguat in 2024. Our prior strategy to conduct research
and development on sGC stimulators has been discontinued and we do not intend to internally pursue research and development or commercialization with
any sGC asset. We are leveraging our legacy sGC stimulator assets with the goal of generating revenues which, if realized, will be used to help fund our
strategic building plan and provide value to our stockholders.
The following table is a high-level summary of our historical sGC portfolio:
Program
Indication(s)
Description
Status
Zagociguat (CNS-penetrant)
MELAS syndrome
(mitochondrial
encephalopathy, lactic
acidosis, and stroke-like
episodes syndrome),
cognitive impairment
Zagociguat is a CNS-penetrant sGC
stimulator that has shown rapid
improvements across a range of endpoints
reflecting multiple domains of disease
activity, including
Sold to Tisento as part of the
Asset Purchase Agreement in
July 2023. On January 27,2025,
Tisento announced dosing the
first participant in their
6
associated with
schizophrenia, and
Alzheimer's Disease with
Vascular Pathology (ADV)
mitochondrial disease-associated
biomarkers.
Phase 2b study evaluating
Zagociguat in MELAS.
CY3018 (CNS-penetrant)
Neuropsychiatric disorders
CY3018 is a CNS-penetrant sGC
stimulator in preclinical development that
has potential for the treatment of
neuropsychiatric diseases and disorders.
Sold to Tisento as part of the
Asset Purchase Agreement in
July 2023
Olinciguat (peripheral)
Cardiovascular diseases
Olinciguat is a vascular sGC stimulator
Cyclerion entered into an
exclusive non-binding license
option agreement with a
separate entity, wholly-owned
by CVCO Therapeutics, Inc. in
July 2024
Praliciguat (peripheral)
Focal Segmental
Glomerulosclerosis (FSGS)
Praliciguat is a systemic sGC stimulator
that is licensed to Akebia for the
treatment of a rare kidney disease.
Out-licensed to Akebia in 2021
and renegotiated terms effective
December 2024.
Research and Development Programs
The following table presents the status of sGC stimulator assets that are either licensed or optioned to other entities:
Akebia License Agreement
On June 3, 2021, we entered into a License Agreement with Akebia (the “Akebia License Agreement”) relating to the exclusive worldwide
license to Akebia of our rights to the development, manufacture, medical affairs and commercialization of pharmaceutical products containing the
pharmaceutical compound known as praliciguat and other related products and forms thereof enumerated in the Akebia License Agreement. Pursuant to the
Akebia License Agreement, Akebia will be responsible for all future research, development, regulatory, and commercialization activities for the out-
licensed praliciguat products.
On December 13, 2024, we announced that Cyclerion and Akebia re-negotiated a mutually beneficial amendment to Akebia's exclusive license
agreement for praliciguat, a systemic sGC stimulator. 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
7
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.
Unless earlier terminated, the Akebia License Agreement will expire on a product-by-product and country-by-country basis upon the expiration
of the last royalty term, which ends upon the longest of (i) the expiration of the patents licensed under the Akebia License Agreement, (ii) the expiration of
regulatory exclusivity for such product, and (iii) 10 years from first commercial sale of such product. Akebia may terminate the Akebia License Agreement
in its entirety or only with respect to a particular licensed compound or product upon 180 days’ prior written notice to Cyclerion, subject to certain
obligations to license back to Cyclerion licensed compounds and candidates and related assets. The parties also have customary termination rights, subject
to a cure period, in the event of the other party’s material breach of the Akebia License Agreement or in the event of certain additional circumstances.
Olinciguat Option to License with CVCO Therapeutics, Inc. (CVCO)
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.
Tisento Asset Purchase Agreement
On May 11, 2023, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with an investor group that included Peter
Hecht (our former CEO), JW Celtics Investment Corp and JW Cycle Inc. which subsequently changed their names to Tisento Therapeutics Holdings Inc.
(“Tisento Parent”) and Tisento Therapeutics Inc. (“Tisento”). Upon the closing on July 28, 2023 following receipt of approval by the Cyclerion
stockholders of the transactions contemplated by the Asset Purchase Agreement, we sold to Tisento the Transferred Assets and Tisento assumed certain
liabilities relating thereto, including, but not limited to (i) liabilities, costs and expenses arising after the date of the Asset Purchase Agreement relating to
the employment of certain Cyclerion employees and the conduct of certain preclinical and clinical trial activities prior to the closing of the transactions
contemplated by the Asset Purchase Agreement, and (ii) liabilities relating to such assets to the extent relating to the period after the closing of the
transaction. In consideration for such sale and assumption, at the closing we received proceeds of $8.0 million as cash consideration, $2.4 million as
reimbursement for certain operating expenses related to such assets for the period between signing and closing of the Asset Purchase Agreement, and
shares of common stock of Tisento Parent comprising 10% of the then issued and outstanding equity securities of Tisento Parent immediately following
such closing, subject to certain protections against dilution.
Under the terms of the Asset Purchase Agreement, we agreed not to compete with Tisento through July 2028 either alone or directly or indirectly
with or through any affiliate or third party, initiate investigational new drug ("IND")-enabling preclinical development, develop, commercially
manufacture, commercialize, or otherwise exploit any compound or product that is (A) a CNS-penetrant sGC stimulator, (B) developed for the treatment of
a program indication, and (C) reasonably expected to compete with any compound or product in a purchased program for the treatment of a program
indication (any such compound or product, a “Cyclerion Competing Product”) anywhere in the world, or (ii) license, convey, grant, or otherwise transfer
any rights to any third party to initiate IND-enabling preclinical development, develop, commercially manufacture, commercialize, or otherwise exploit a
Cyclerion Competing Product anywhere in the world.
8
On January 27, 2025, Tisento Therapeutics announced that the first patient has been dosed in its global Phase 2b PRIZM study. The study is
investigating the impact of once-daily oral zagociguat treatment on fatigue, cognitive impairment, and other key aspects of the rare mitochondrial disease
MELAS (Mitochondrial Encephalomyopathy, Lactic Acidosis, and Stroke-like Episodes).
PRIZM – a Phase 2b Randomized, Placebo-Controlled Trial Investigating Zagociguat in MELAS – is evaluating the efficacy and safety of oral
zagociguat 15 mg or 30 mg compared to placebo when administered once-daily for 12 weeks in participants with genetically and phenotypically defined
MELAS. The PRIZM study has a crossover design, with two 12-week treatment periods separated by a 4-week washout period. All participants will
receive zagociguat during one of the 12-week periods and placebo during the other. Participants who complete the study may be eligible for an open-label
extension study. PRIZM is a global study that will enroll approximately 44 participants at mitochondrial disease centers of excellence in the U.S., Italy,
Germany, United Kingdom, Australia, and Canada. ClinicalTrials.gov (NCT06402123) for more information.
Intellectual Property
We protect the intellectual property and proprietary technology that we believe is important to our business, including by pursuing and
maintaining U.S. and foreign patents that cover our product candidates and compositions, their methods of use and the processes for their preparation, as
well as any other relevant inventions and improvements that are commercially important to the development of our business. We also rely on trade secrets
to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. We expect to also rely on licenses
for patented intellectual property owned by third parties.
Our commercial success depends in part on our ability to obtain and maintain patent and other proprietary protection for commercially important
technology, inventions, improvements and know-how related to our business, defend and enforce our patents, preserve the confidentiality of our trade
secrets and operate without infringing the valid and enforceable patents and proprietary rights of third parties.
We have 20 issued U.S. patents, 11 pending U.S. patents applications and numerous foreign patents and pending patent applications related to
our sGC programs. Patent families are filed either as utility U.S. patents or under an international patent law treaty (PCT) that provides a unified procedure
for filing a single initial patent application to seek patent protection for an invention simultaneously in each of the 157 contracting states, followed by the
process of entering national phase, which requires a separate application in each of the member states in which national patent protection is sought.
The technology underlying our sGC patents and pending patent applications has been developed by us and was not acquired from any in-
licensing agreement. We own all of the issued patents and pending applications.
The intellectual property portfolios for our most advanced product candidates (praliciguat and olinciguat) are summarized below.
Praliciguat Patent Portfolio
Our praliciguat patent portfolio includes 13 U.S. issued patents, seven pending U.S. patent applications, and numerous patents and pending
patent applications in foreign jurisdiction.
One of the U.S. patents, US 9,481,689, which will expire in 2034, is directed to praliciguat and pharmaceutical compositions thereof. The term of
this U.S. patent may be eligible for patent term extension as described below. Three other U.S. patents, US 8,748,442, US 9,139,564, and 10,189,809,
expire in 2031, and provide generic coverage of praliciguat and intermediates used in the preparation of praliciguat, as well as compounds related to
praliciguat, respectively. A fifth U.S. patent, US 10,183,021 will expire in 2034 and is directed to the treatment of resistant hypertension with praliciguat or
combinations of praliciguat and known anti-hypertensives. A sixth U.S. patent, US 209,639,308 will expire in 2034 and is directed to the treatment of
diabetic nephropathy with praliciguat or combinations of praliciguat with other agents. The seventh U.S. patent, US 10,927,136 covers phosphorus
prodrugs of praliciguat and will expire in 2037. The eighth U.S. Patent, US 11,389,449, is directed to the treatment of metabolic
9
syndrome with praliciguat and will expire in 2038. The ninth U.S. Patent, US 11,357,777, is directed to the treatment of a severe form of liver disease
named nonalcoholic steatohepatitis (NASH) with praliciguat and other compounds and will expire in 2039. The tenth to thirteenth, U.S. Patents, US
11,319,308 (expiring in 2039), US 11,773,089 (expiring in 2037), US 11,274,096 (expiring in 2039) and US 11,708,361 (expiring in 2039) are directed to
the syntheses of praliciguat or of intermediates useful in the manufacture of praliciguat.
Two pending U.S. patent applications that, if issued, will expire in 2031 and 2034, respectively, provide generic coverage for praliciguat
composition of matter. Two additional U.S. patent applications that, if issued, will expire in 2037 and 2039, respectively, provide coverage for methods of
large-scale preparation of praliciguat. We also have a pending U.S. application directed to a praliciguat formulation, that, if issued, will expire in 2036.
Another pending U.S. application is directed to phosphorous prodrugs of praliciguat and, if issued, will expire in 2037.
Another of the U.S. pending applications is directed to methods of treating diabetic nephropathy with praliciguat, and if issued, will expire in
2040 or later.
Furthermore, we have eight granted European patents expiring between 2031 and 2039. Each of these patents is validated in multiple countries or
registered in multiple countries as a European Unitary Patent. We hold nine granted Japanese patents expiring between 2031 and 2040. We also have
numerous patent applications pending in foreign jurisdictions.
Olinciguat Patent Portfolio
Our olinciguat patent portfolio includes 14 U.S. issued patents, five pending U.S. patent applications and numerous patents and pending
applications in foreign jurisdictions.
One of the U.S. patents, US 9,586,937, which will expire in 2034, is directed to olinciguat and pharmaceutical compositions thereof. The term of
this U.S. patent may be eligible for patent term extension as described below. Three other U.S. patents, US 8,748,442, US 9,139,564, and US 10,189,809,
expire in 2031, and provide generic coverage of olinciguat, intermediates used in the preparation of olinciguat, and compounds related to olinciguat,
respectively. The fifth U.S. patent, US 10,517,874, which will expire in 2034 is directed to the treatment of SCD using olinciguat alone or in combinations
with other therapeutic agents. The sixth and seventh U.S. issued patents, US 10,889,577, and US 11,572,358, will expire in 2037 and are directed to
polymorphs of olinciguat. The eighth issued patent, US 11,207,323, will expire in 2034 and provides coverage for stereoisomers of olinciguat. Five more
U.S. issued patents, US 11,319,308 (expiring in 2039), US 11,773,089 (expiring in 2037), US 11,274,096 (expiring in 2039), US 11,834,444 (expiring in
2038) and US 12,030,874 (expiring in 2039) are directed to the chiral syntheses of olinciguat or the syntheses of intermediates useful in the manufacture of
olinciguat. The last U.S. issued patent, US 11,357,777, is directed to the treatment of NASH with olinciguat and other compounds and will expire in 2039.
One pending U.S. patent application, if issued, will expire in 2037 and provides additional coverage for polymorphs of olinciguat. Another
pending U.S. patent application, if issued, will expire in 2031, and provides generic coverage for olinciguat. Two pending U.S. patent applications are
directed to processes and synthetic intermediates for preparing olinciguat and, will expire in 2039 and 2037, respectively. These third and fourth patent
applications have recently been allowed. A fifth pending U.S. patent application is directed to the treatment of heart failure with preserved ejection fraction
(HFpEF) in post-menopausal women with olinciguat and other sGC stimulators. If issued, the corresponding patent will expire in 2042.
Furthermore, we have nine granted European patents expiring between 2031 and 2039 each of them validated in multiple countries or registered
in multiple countries as Unitary European Patents; eight granted Japanese patents expiring between 2031 and 2039; seven granted Chinese patents expiring
between 2031 and 2039; and a large number of issued patents in other foreign jurisdictions, expiring between 2031 and 2039. We also have numerous
pending patent applications in foreign jurisdictions. Some of these patents may be eligible for patent term extension or the foreign jurisdiction equivalent,
depending on the jurisdiction.
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Patent Term
The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which
we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application, assuming that all applicable maintenance or annuity
fees are paid. In the United States, and China, a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for
administrative delays by the respective patent offices, in examining and granting a patent, or, in the US, the term may be shortened if a patent is terminally
disclaimed over an earlier-filed patent. The duration of foreign patents varies in accordance with provisions of applicable local law, but typically is also 20
years from the earliest effective filing date. However, the actual protection afforded by a patent varies on a product-by-product basis, from country to
country, and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the
availability of legal remedies in that country, and the validity and enforceability of the patent.
In addition, the term of a U.S. patent that covers an US Food and Drug Administration (FDA)-approved drug may be eligible for patent term extension
under the Drug Price Competition and Hatch-Waxman Act, to account for some of the time the drug is under development and regulatory review after the
patent is granted. For a drug for which FDA approval is the first permitted marketing of the active ingredient, the Hatch-Waxman Act allows for extension
of the term of one U.S. patent that includes at least one claim covering the composition of matter of an FDA-approved drug (drug substance or drug
product), an FDA-approved method of treatment using the drug and/or a method of manufacturing the FDA-approved drug. The extended patent term
cannot exceed the shorter of five years beyond the non-extended expiration of the patent or 14 years from the date of the FDA approval of the drug. Some
foreign jurisdictions, including Europe, Japan, and China, have similar patent term extension provisions, which allow for extension of the term of a patent
that covers a drug approved by the applicable foreign regulatory agency.
Trade Secrets and Proprietary Information
In addition to patents, we rely upon unpatented trade secrets and know-how and continuing technological innovation to develop and maintain our
competitive position. We typically rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate
for, patent protection. We protect our proprietary information, including trade secrets and know-how, by establishing confidentiality agreements with our
commercial partners, collaborators, scientific advisors, employees and consultants and invention assignment agreements with our employees, consultants,
scientific advisors and contractors. These agreements generally provide that all confidential information developed or made known during the course of an
individual or entities’ relationship with us must be kept confidential during and after the relationship. These agreements also typically provide that all
inventions resulting from work performed for us or relating to our business and conceived or completed during the period of employment or assignment, as
applicable, shall be our exclusive property. These agreements are designed to protect our proprietary information and, in the case of the invention
assignment agreements, to grant us ownership of technologies that are developed through a relationship with a third party. However, these agreements may
be breached, and we may not have adequate remedies for any breach. We also take other appropriate precautions, such as physical and technological
security measures, to guard against misappropriation of our proprietary information by third parties. In addition, our trade secrets may otherwise become
known or be independently discovered by competitors. To the extent that our commercial partners, collaborators, employees and consultants use
intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
Government Regulation
United States Regulation
The FDA regulates medical products, including prescription drugs under the Federal Food, Drug and Cosmetic Act, or FDCA, and its
implementing regulations. Products are also subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals
and the subsequent compliance with applicable federal, state, local and regulations requires the expenditure of substantial time and financial resources.
Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval may
subject an applicant and/or sponsor to a variety of administrative or judicial sanctions, including imposition of a clinical hold, refusal by the FDA to
approve applications, withdrawal of an approval, import/export delays, issuance of warning letters and other types of enforcement letters, product recalls,
product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution,
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disgorgement of profits, debarment, or civil or criminal investigations and penalties brought by the FDA, the Department of Justice, State Attorneys
General, or other governmental entities.
The process required by the FDA before a drug may be approved and marketed in the United States generally involves the following:
•
completion of extensive nonclinical laboratory and animal studies conducted in accordance with applicable regulations, including Good
Laboratory Practices, or GLP, regulations and applicable requirements for the humane use of laboratory animals;
•
submission to the FDA of an IND application for human clinical testing, which must become effective before human clinical trials may
commence;
•
approval by an independent institutional review board ("IRB") to proceed with initiating the clinical trial at each corresponding
investigational site.
•
performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, GCPs and other clinical-
trial related regulations to establish the safety and efficacy of the product for each proposed indication;
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preparation and submission to the FDA of an NDA;
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satisfactory completion of one or more FDA inspections such as pre-approval inspection(s) of the manufacturing facility or facilities at
which the product, or components thereof, are made to assess compliance with current GMP;
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payment of user fees for FDA review of the NDA; and
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FDA acceptance, review and approval of the NDA, which may include an Advisory Committee review.
The development and approval process requires substantial time, effort and financial resources and the receipt and timing of any approval is
uncertain.
Nonclinical and Clinical Trials in Support of an NDA
Before testing any drug product candidate in humans, the product candidate must undergo rigorous nonclinical testing. Nonclinical studies
include laboratory evaluations of the product candidate, as well as in vitro and animal studies to assess the potential safety and efficacy of the product
candidate. The conduct of nonclinical studies that determine the product safety information for administration to humans must comply with federal
regulations and requirements, including GLP regulations. The sponsor must submit the results of the nonclinical studies, together with manufacturing
information, analytical data, any available clinical data or literature and a proposed clinical study protocol, to the FDA as part of an IND, which must
become effective before clinical trials in a given indication may be commenced. The IND will become effective automatically 30 days after receipt by the
FDA, unless the FDA raises concerns or questions about the content of the IND or the conduct of the proposed trial(s) as outlined in the IND prior to that
time. In such a case, the IND sponsor must resolve any outstanding concerns with the FDA before the clinical trial(s) can proceed.
Clinical trials involve the administration of the product candidate to human subjects under the supervision of qualified investigators in
accordance with GCP requirements. Each clinical trial must be reviewed and approved by an IRB for the sites at which the trial will be conducted to ensure
that the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB will consider,
among other things, ethical factors, the safety of human subjects and the possible liability of the institution. The IRB also approves the informed consent
form, including a privacy statement, which must be provided to each clinical trial participant or his or her legal representative, and must monitor the
clinical trial until completed.
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Clinical trials are typically conducted in three sequential phases prior to approval, which may overlap or be combined:
•
Phase 1. Phase 1 clinical trials generally involve a small number of healthy participants or disease-affected participants who are initially
exposed to a single dose and then multiple doses of the product candidate. The primary purpose of these clinical trials is to assess the
metabolism, pharmacokinetics, pharmacologic action, side effect tolerability and safety of the drug.
•
Phase 2. Phase 2 clinical trials usually involve studies in a limited population of participants with a disease or disorder to evaluate the
efficacy of the product candidate for specific indications, determine dosage tolerance and optimal dosage, and identify possible adverse
effects and safety risks.
•
Phase 3. Phase 3 clinical trials generally involve a larger number of participants at multiple sites and are designed to provide the data
necessary to demonstrate the effectiveness of the product for its intended use, its safety in use, to establish the overall benefit/risk profile of
the product and to provide an adequate basis for product approval by the FDA.
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Phase 4. Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be required to be conducted after approval to gain
additional experience from the treatment of participants in the intended therapeutic indication and to document a clinical benefit in the case
of drugs approved under accelerated approval regulations, or when otherwise requested by the FDA. Failure to conduct the Phase 4 clinical
trials per the plan required by the FDA could result in enforcement action or withdrawal of approval.
Progress reports detailing new information and changes such as the results of clinical trials, new nonclinical studies, new product quality data, or
changes to manufacturing controls must be submitted at least annually to the FDA and more frequently if serious adverse events occur. The FDA or the
sponsor may suspend or terminate a clinical trial at any time, or the FDA may impose other sanctions on various grounds, including a finding that the
research participants are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its
institution if the clinical trial is not being conducted in accordance with the requirements of the IRB or if the drug has been associated with unexpected
serious harm to participants. There are also requirements related to registration and reporting of certain clinical trials and completed clinical trial results to
public registries.
Submission and Review of an NDA
Assuming successful completion of the required nonclinical and clinical testing, the results of nonclinical studies and clinical trials, together with
detailed information on the product’s manufacture, composition, quality controls and proposed labeling, among other things, are submitted to the FDA in
the form of an NDA, requesting approval to market the product for one or more indications. The application must be accompanied by a significant user fee
payment, which typically increases annually, although waivers may be granted in limited cases (e.g., for products that have received an Orphan
Designation).
The FDA has substantial discretion in the approval process and may refuse to accept any application or decide that the data is insufficient for
approval and may require additional nonclinical or clinical studies, or other information (e.g., product quality data or manufacturing controls) before it
accepts the filing. If an NDA has been accepted for filing, which occurs 60 days after submission, the FDA sets a user fee goal date that informs the
applicant of the specific date by which the FDA intends to complete its review. Under the goals and policies agreed to by the FDA under the Prescription
Drug User Fee Act, or PDUFA, for original NDAs, the FDA has ten months from the filing date in which to complete its review of a standard application,
and six months from the filing date for an application with priority review. The FDA does not always meet its PDUFA goal dates, and the review process
may be significantly extended by FDA requests for additional information and clinical data or clarification.
The FDA reviews NDAs to determine, among other things, whether the proposed product is safe and effective for its intended use, and whether
the product is being manufactured in accordance with current GMP to assure and preserve the product’s identity, strength, quality and purity. Before
approving an NDA, the FDA typically will inspect the facilities at which the product is manufactured and will not approve the product unless the
manufacturing facilities comply with current GMP. Additionally, the FDA will frequently inspect one or more clinical trial sites for compliance with GCPs
and integrity of the data supporting safety and efficacy.
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During the approval process, the FDA will also prepare an integrated benefit-risk assessment and determine whether a Risk Evaluation and
Mitigation Strategy, or REMS, is necessary to ensure that the benefits of the drug outweigh the risks and to assure the safe use of the product. If the FDA
concludes a REMS is needed, the sponsor of the application must submit a proposed REMS. A REMS that includes elements to assure safe use, or ETASU,
can substantially increase the costs of commercializing a drug. The FDA could also require a special warning, known as a boxed warning, to be included in
the product label in order to highlight a particular safety risk. Boxed warnings may limit the type of advertising for a drug. The FDA may also convene an
advisory committee of external experts to provide input on certain review issues relating to risk, benefit and interpretation of clinical trial data.
On the basis of the FDA’s evaluation of the NDA and accompanying information, including the results of the inspection of the manufacturing
facilities, FDA will issue either an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug and is
accompanied by specific prescribing information for specific conditions of use. A Complete Response Letter indicates that the review cycle of the
application is complete and the application will not be approved in its present form. A Complete Response Letter usually describes all of the specific
deficiencies in the submission identified by the FDA and may require additional clinical or other data, additional pivotal Phase 3 clinical trial(s) and/or
other significant and time-consuming requirements related to clinical trials, nonclinical studies or manufacturing. If a Complete Response Letter is issued,
the applicant may either amend the NDA with data to address the raised concerns, resubmit the NDA addressing all the deficiencies identified in the letter,
engage in dispute resolution with the FDA about the identified deficiencies in the CRL, or withdraw the application. Even with submission of this
additional information, the FDA may ultimately decide that the re-submitted application does not satisfy the regulatory criteria for approval.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug intended to treat a rare disease or condition affecting fewer than
200,000 individuals in the United States, or in other limited cases. Orphan drug designation must be requested before submitting an NDA. Orphan drug
designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process, though companies developing orphan
drugs may be eligible for certain incentives, including tax credits for qualified clinical testing.
Generally, if a product that has orphan drug designation subsequently receives the first FDA approval for the disease or condition for which it
has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the
same active component parts for the same indication for seven years from the date of such approval, except in limited circumstances. Competitors,
however, may receive approval of different active component parts for the same indication or obtain approval for the same active component parts for a
different indication. If one of our product candidates designated as an orphan drug receives marketing approval for an indication broader than that which is
designated, it may not be entitled to orphan drug exclusivity.
Expedited Review and Approval Application Process
The FDA has various programs that are intended to expedite development and approval of drugs intended for the treatment of serious or life-
threatening diseases or conditions and that demonstrate the potential to address unmet medical needs.
An application may be eligible for a “fast track” designation for a product that is intended to treat a serious or life-threatening disease or
condition and demonstrates the potential to address an unmet medical need. Fast track designation provides opportunities for more frequent interactions
with the FDA review team and permits FDA to consider sections of the NDA on a rolling basis before the complete application is submitted.
In addition, a sponsor can request designation of a product candidate as a “breakthrough therapy”. A breakthrough therapy is defined as a drug
that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, where preliminary clinical
evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. The FDA
must take certain actions with respect to breakthrough therapies, such as holding timely meetings with and providing advice to the product sponsor.
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An application may be eligible for “accelerated approval” where the product candidate is intended to treat a serious or life-threatening illness and
provides meaningful therapeutic benefit over existing treatments; applications eligible for accelerated approval may be approved on the basis of adequate
and well-controlled clinical trials establishing that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on
a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, or IMM, that is reasonably likely to predict an effect on IMM or
other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. As a
condition of approval, the FDA requires a sponsor to conduct confirmatory studies to verify the predicted effect on IMM or another clinical endpoint, and
the product may be subject to expedited withdrawal procedures.
Once an NDA is submitted for a product intended to treat a serious condition, the FDA may assign a priority review designation if the FDA
determines that the product, if approved, would provide a significant improvement in safety or effectiveness. Under priority review, the FDA must review
an application in six months, compared to ten months for a standard review. A product may be eligible for more than one expedited approval program.
Even if a product qualifies for one or more of these programs, however, the FDA may later decide that the product no longer meets the conditions for
qualification or decide that the time period for FDA review or approval will not be shortened. Furthermore, these expedited review pathways do not change
the standards for approval and may not ultimately expedite the development or approval process.
Non-Patent Exclusivity
In addition to patent exclusivity, the holder of the NDA for the listed drug may be entitled to a period of non-patent exclusivity, during which the
FDA cannot approve an ANDA for approval of a generic or 505(b)(2) application that relies on the listed drug as protected by regulatory exclusivity.
An NDA for a new chemical entity may receive five years of exclusivity, whereby the FDA will not accept for filing, with limited exceptions, a
product seeking to rely upon the FDA’s findings of safety or effectiveness for such new chemical entity. An ANDA containing a paragraph IV patent
certification can be filed after four years. Alternatively, an NDA may obtain a three-year period of non-patent market exclusivity for a particular condition
of approval, or change to a marketed product, such as a new formulation for a previously approved product, if one or more new clinical studies (other than
bioavailability or bioequivalence studies) was essential to the approval of the application and was conducted/sponsored by the applicant.
Pediatric Exclusivity
Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment of an
additional six months of marketing protection to the term of any existing regulatory exclusivity for both drugs and biologics, and also unexpired Orange
Book listed patents in the case of drugs. This six-month exclusivity may be granted if a sponsor submits pediatric data that fairly respond to a written
request from the FDA for such data. The data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial
is deemed to fairly respond to the FDA’s request, the additional protection is granted.
Post-Approval Requirements
Following approval of a new product, the manufacturer and the approved product are subject to pervasive and continuing regulation by the FDA,
including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion
and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other
labeling claims and some manufacturing and supplier changes, are subject to prior FDA review and approval. There also are continuing annual user fee
requirements for marketed products and the establishments where such products are manufactured, as well as new application fees for certain supplemental
applications. The FDA may impose a number of post-approval requirements as a condition of approval of an NDA, such as Phase 4 clinical trials or a
REMS.
In addition, entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA
and state agencies and are subject to periodic unannounced inspections by the FDA
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and such state agencies for compliance with current GMP requirements. Changes to the manufacturing process are strictly regulated and often require prior
FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from current GMP requirements and
impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly,
manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain current GMP compliance.
Once an approval is granted, the FDA may issue enforcement letters or withdraw the approval if compliance with regulatory requirements and
standards is not maintained or if problems occur after the product reaches the market. Corrective action could delay product distribution and require
significant time and financial expenditures. Later discovery of previously unknown safety issues with a product, including adverse events of unanticipated
severity or frequency, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to
assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include:
•
restrictions on the marketing or manufacturing of the product, suspension of the approval, complete withdrawal of the product from the
market or product recalls;
•
fines, warning letters or other enforcement-related letters of clinical holds on post-approval clinical trials;
•
refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product
approvals;
•
product seizure or detention, or refusal to permit the import or export of products;
•
injunctions or the imposition of civil or criminal penalties; and
•
consent decrees, corporate integrity agreements, debarment, or exclusion from federal healthcare programs.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted
only for the approved indications, in accordance with the provisions of the approved label and FDA guidance. The FDA and other agencies actively enforce
the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be
subject to significant liability, including investigation by federal and state authorities. Additionally, all promotional material must be truthful and non-
misleading, and present balanced information regarding the risks and benefits of the drug product.
Other Regulatory Requirements
Outside the U.S., our abilities to develop and market a product are contingent upon receiving approval and ultimately marketing authorization
from the appropriate regulatory authorities. The requirements governing the conduct of clinical trials, marketing authorization, pricing and reimbursement
vary widely from jurisdiction to jurisdiction. At present, foreign marketing authorizations are applied for at a national level, although within the E.U.
registration procedures are available to companies wishing to market a product in more than one E.U. member state.
We are subject to U.S. federal and foreign anti-corruption laws. Those laws include the U.S. Foreign Corrupt Practices Act, or FCPA, which
prohibits U.S. corporations and their representatives from offering, promising, authorizing, or making payments to any foreign government official,
government staff member, political party or political candidate in an attempt to obtain or retain business abroad. The scope of the FCPA encompasses
certain healthcare professionals in many countries. We are also subject to similar laws of other countries that have enacted anti-corruption laws and
regulations.
Pediatric Development
In the European Union, companies developing a new medicinal product must agree to a Pediatric Investigation Plan, or PIP, with the European
Medicines Agency (EMA) and must conduct pediatric clinical trials in accordance with that PIP, unless a deferral or waiver applies, (e.g., because the
relevant disease or condition occurs only in adults). The MAA for the product must include the results of pediatric clinical trials conducted in accordance
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with the PIP, unless a waiver applies or a deferral has been granted, in which case the pediatric clinical trials must be completed at a later date. Where the
MAA includes the results of all pediatric studies conducted in accordance with the PIP and the results are reflected in the approved summary of product
characteristics, the holder of a patent or supplementary protection certificate is entitled to receive a six-month extension of the protection under a
supplementary protection certificate or, in the case of orphan medicinal products, the product is eligible for a two-year extension of the orphan market
exclusivity. This pediatric reward is subject to specific conditions and is not automatically available when data in compliance with the PIP are developed
and submitted.
In the US, under Pediatric Research Equity Act (PREA), a pediatric development plan is required to accompany an NDA for all drugs, except
those receiving non-oncology Orphan Drug Designation. This may include waiver or deferral of pediatric studies. The Best Pharmaceuticals for Children
Act (BPCA) also allows for agreement with FDA on a pediatric written request that, if fulfilled, may extend data exclusivity for the molecule for an
additional 6 months.
We believe that our plans for a potential new drug candidate for TRD under consideration may be applicable for the treatment of pediatric
patients.
Competition
Despite our belief that the potential product that we intend to develop and commercialize in TRD will be differentiated, we will face competition
from many different sources. Potential competition includes major/specialty pharmaceutical, biopharmaceutical, device and biotechnology companies,
academic institutions, governmental agencies and medical research organizations. Additionally, we would expect that, if approved, our product will
compete with the standard of care and any new therapies that may become available in the future. Several biopharmaceutical companies have therapies in
clinical development for TRD and we are aware that many more are investigating treatments for TRD (e.g., psychedelic-related therapies are currently in
development for TRD but have not yet been approved).
TRD is a disease with high unmet need and is associated with multiple serious public health implications. The FDA and the EMA have adopted
the most used definition of TRD (i.e., inadequate response to a minimum of two antidepressants despite adequacy of the treatment trial and adherence to
treatment). A number of published sources estimate that at least 30% of persons with depression meet this definition. There are many treatment paradigms
that have been employed for the management of TRD. In general, these treatment paradigms /therapies can be bucketed into categories of:
pharmacotherapies, somatic therapies and psychotherapeutic approaches. It is well known that the majority of these treatments have serious limitations
despite their benefit.
•
Pharmacotherapies: antidepressants and antipsychotics indicated for use in major depressive disorder are frequently prescribed, combined
or augmented with a second agent to treat TRD. Additionally, mood stabilizers (e.g. lithium) are utilized as treatments, alone or in
combination for TRD. Only two pharmacotherapies are approved for TRD in the U.S.: Spravato (esketamine), marketed by Janssen, and
Symbyax (olanzapine/fluoxetine hydrochloride capsules), developed by Eli Lilly and Company.
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Somatic Therapies: multiple somatic therapies are used for the management of TRD such as electroconvulsive therapy (ECT), repetitive
transcranial magnetic stimulation (rTMS), vagus nerve stimulation (VNS), and deep brain stimulation (DBS).
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Psychotherapeutic Approaches: manual-based psychotherapies are not proven to be efficacious as a standalone intervention in TRD, but
their efficacy in combination with antidepressants has been noted.
The biopharmaceutical industry is highly competitive within and across therapeutic categories and indications. There are many public and private
biopharmaceutical companies, universities, government agencies and other research organizations actively engaged in the research and development and
commercialization of products that may be similar to our product candidates or address similar markets. In addition, the number of companies seeking to
develop and commercialize products and therapies competing with our product candidates is likely to increase. However, we seek to build our portfolio
with key differentiating attributes to provide a competitive advantage in the markets we target. The success of all of our product candidates, if approved,
will likely depend upon their efficacy,
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safety, convenience, price, the level of generic competition and the availability of reimbursement from government and other third-party payors.
Many of our competitors may have greater financial resources and broader expertise in research and development, manufacturing, nonclinical
testing, conducting clinical trials, obtaining regulatory approvals and marketing approved medicines than we do. Mergers and acquisitions in the
pharmaceutical, biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors.
These competitors could also compete with us in establishing clinical trial sites and participant registration for clinical trials, as well as in acquiring
technologies complementary to, or necessary for, our programs. Smaller or early-stage companies may also prove to be significant competitors, particularly
through collaborative arrangements with large and established companies.
Competition can also impact Tisento (in which we hold an equity interest), as well as companies which we have out-licensed or seek to out-
license our product candidates. To date, the product candidates we have sold to Tisento or out-licensed to Akebia are either in early stage clinical or pre-
clinical stages or not yet received any approval allowing for the commercial sale of these product candidates.
Manufacturing
We do not own or operate, and currently have no plans to establish, any manufacturing facilities. We intend to depend on third-party contract
manufacturing organizations, or CMOs, for all our requirements of raw materials, drug substance and drug products for clinical trials and nonclinical
research. We intend to continue to rely on CMOs for the supply of our retained assets for all stages of clinical development and commercialization, as well
as for the supply of any other product candidates that we may identify. We require all our CMOs to conduct manufacturing activities in compliance with
current GMP requirements.
Human Capital Resources
As a small, innovative company, if in the future we elect to start growing our internal operations, our success will depend on attracting, retaining
and motivating highly skilled and experienced scientific, medical and other personnel. We plan to provide compensation and benefits programs which may
include competitive salaries, potential annual discretionary bonuses, stock awards, a 401(k) plan with employer match, healthcare and insurance benefits,
health savings and flexible spending accounts, unlimited vacation time, among other benefits. Our employees will be further guided by our code of conduct
and our cultural values of seeking to serve patients, acting with integrity, empowering people and innovating for solutions.
Employee Profile
As of December 31, 2024, we had one employee and several consultants, including our Chief Financial Officer. We may in the future seek to
expand our employee base, hire additional consultants and also outsource certain functions to other firms.
Corporate Information
We were incorporated in the Commonwealth of Massachusetts on September 6, 2018. Our principal executive offices are located at 245 First
Street, Riverview II, 18th Floor, Cambridge, MA 02142. Our telephone number is (857) 327-8778. Our common stock is listed on the Nasdaq Capital
Market under the symbol “CYCN.”
Available Information
Our internet website address is www.cyclerion.com. In addition to the information contained in this Annual Report, information about us can be
found on our website. Our website and information included in or linked to our website are not part of this Annual Report.
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Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge through our website as soon
as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission, or the SEC. The SEC maintains
an internet site that contains reports, proxy and information statements and other information. The address of the SEC’s website is www.sec.gov.
Item 1A. Risk Factors.
The following information sets forth risk factors that could cause our actual results to differ materially from those contained in forward-looking
statements we have made in this Annual Report on Form 10-K and those we may make from time to time. You should carefully consider the risks described
below, in addition to the other information contained in this Annual Report on Form 10-K and our other public filings. Our business, financial condition or
results of operations could be harmed by any of these risks. The risks and uncertainties described below are not the only ones we face. Additional risks not
presently known to us or other factors not perceived by us to present significant risks to our business at this time also may impair our business operations.
In this section, we first provide a summary of the more significant risks and uncertainties we face and then provide a full set of risk factors and discuss
them in greater detail.
Risk Factors Summary
Risks Related to our Financial Position and Capital Needs
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We are a biopharmaceutical company with a limited operating history and no products approved for commercial sale.
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We have incurred significant losses and have never generated revenue from product sales; we anticipate that we will continue to incur
significant losses for the foreseeable future and may never be profitable.
•
There is substantial doubt regarding our ability to continue as a going concern. We will need to raise additional funding, which may not be
available on acceptable terms, if at all, to continue as a going concern and advance our current and any potential future product candidates.
Failure to obtain capital when needed may force us to delay, limit or terminate our product development efforts or other operations. Raising
additional capital may dilute our existing shareholders, restrict our operations or cause us to relinquish valuable rights.
•
We are in the process of in-licensing a product candidate for treatment resistant depression and our approach to the discovery and
development of this and any future product candidates we may develop may never lead to marketable products.
Risks Related to Development and Clinical Testing of Our Products and Product Candidates
•
We may encounter substantial delays in our activities, or we may fail to demonstrate safety and efficacy to the satisfaction of applicable
regulatory authorities in the development of our compounds.
•
We could encounter difficulties in enrolling participants in any future clinical studies, which could delay or prevent progress of our product
candidates.
•
We may be unable to obtain regulatory approval f and unable to generate product revenue for any product candidate.
•
Any future product candidates may cause side effects that may result in label restrictions.
•
We may have to change our nonclinical or clinical study protocols due to regulatory reasons or unanticipated events, which could result in
increased costs to us and could delay our development timeline.
Risks Related to Reliance on Licensees, Tisento and Third Parties
•
There are risks in our investment in Tisento tied to Tisento developing, obtaining regulatory approval for, launching and commercializing
its product candidates.
19
•
There is 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.
•
Akebia may not be successful in developing and commercializing any therapies through its praliciguat out-license with the Company.
•
We may not be successful in entering into necessary licenses or collaboration agreements and we may enter into collaboration or license
arrangements in the future that ultimately are not successful.
•
We expect that we will continue to rely on third parties to conduct nonclinical and clinical studies and to manufacture drug supplies for our
product candidates. If these third parties do not execute successfully, our business could be substantially harmed.
Risks Related to Intellectual Property
•
We share confidential information with third-party vendors, including trade secrets and know-how, which increases the possibility that our
confidential information will be misappropriated or disclosed.
•
We may be unable to adequately protect our proprietary technologies or obtain and maintain issued patents that are sufficient to protect our
product candidates.
•
We may infringe the intellectual property rights of others, which may prevent or delay our product development efforts.
•
We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.
•
We may not seek to protect our intellectual property rights in all jurisdictions throughout the world and we may not be able to adequately
enforce our intellectual property rights even in the jurisdictions where we seek protection.
•
We may not be able to obtain additional protection under the Drug Price Competition and Patent Term Restoration Act of 1984, or the
Hatch-Waxman Act, and similar foreign legislation by extending the patent terms and obtaining data exclusivity for our product candidates.
•
We may be subject to damages resulting from claims that we or our employees, consultants or advisors have wrongfully used or disclosed
alleged trade secrets of their current or former employers.
Risks Related to the Future Commercialization of our Potential Future Product Candidates
•
If the market opportunities for our product candidates are smaller than we estimate, our revenue and ability to achieve profitability may be
harmed.
•
We may fail to comply with healthcare and other regulations and could face substantial penalties.
•
Our competitors may achieve regulatory approval before us or develop therapies that are safer, more advanced or more effective than ours.
•
The impact of healthcare reform and other governmental and private payor initiatives, as well as the potential for reductions in federal
government funding for development and clinical trials may harm our business.
•
Our prospects for success depend on our ability to attract, retain and motivate qualified personnel.
•
We will need to expand our organization and we may experience difficulties in managing growth of our employee base.
•
We face potential product liability exposure, and, if claims are brought against us, we may incur substantial liability.
•
We could fail to maintain proper and effective internal controls and our ability to produce accurate and timely financial statements could be
impaired.
•
If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience
adverse impacts resulting from such compromise, including, but not
20
limited to, regulatory investigations or actions; litigation; fines and penalties; interruptions to our commercial operations, clinical trials or
other operations; harm to our reputation; loss of revenue or profits; loss of sales and other adverse consequences.
•
If we or any contract manufacturers and suppliers we engage fail to comply with environmental, health and safety laws and regulations, we
could become subject to fines or penalties or incur.
•
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act, or the FCPA, and other worldwide anti-bribery
laws.
•
The pandemic and future pandemics may disrupt our business, including our development activities.
Risks Related to the holders of Our Common Stock
•
We have limited trading history and a relatively limited public float for our shares and our common stock market price may fluctuate
widely.
•
The market price of our common stock may fluctuate widely and you could lose all or part of your investment in our common stock as a
result.
•
Any future failure to comply with Nasdaq’s continued listing requirements could result in the delisting of our common stock.
•
We have adopted anti-takeover provisions in our articles of organization and bylaws and are subject to provisions of Massachusetts law that
may frustrate any attempt to remove or replace our current board of directors or to effect a change of control or other business combination
involving our company.
Risks Related to Our Financial Position and Capital Needs
As we are a biopharmaceutical company with a limited operating history and no products approved for commercial sale, valuing our business and
predicting our prospects are challenging.
We are a biopharmaceutical company that was incorporated in 2018. Our business was conducted within Ironwood prior to that time, and we had
no history as an independent company prior to the completion of the separation which occurred in 2019. We are seeking to develop new products for
treatment resistant depression. We have also developed a pipeline of sGC stimulators, but we have no products approved for commercial sale, and we have
never generated revenue from product sales nor have Tisento or Akebia ever generated product sales from products incorporating our compounds. Our
operating activities to date have been limited primarily to organizing and staffing our company, business planning, raising capital, developing our
technology, identifying potential product candidates, pursuing partnership opportunities, and conducting early-stage clinical trials for our product
candidates.
To date, we have not obtained marketing approval for any of our product candidates; engaged on our own or through a third party, in commercial
scale manufacturing or conducted sales and marketing activities necessary for the successful commercialization of our product candidates. Our short
operating history offers limited insight into our prospects for success or even viability. We expect our operating performance to fluctuate. We will
encounter challenges frequently experienced by early-stage biopharmaceutical companies in rapidly evolving fields and we have not yet demonstrated an
ability to successfully navigate such challenges. If we do not successfully address the challenges we face, our business, prospects, financial condition and
results of operations will be materially harmed.
Our business has incurred significant losses and we anticipate that we will continue to incur significant losses for the foreseeable future. We have
never generated revenue from product sales and may never be profitable.
Our business has incurred operating losses due to costs incurred in connection with our research and development activities and general and
administrative expenses associated with our operations. Our net losses for the years ended December 31, 2024 and 2023 were $3.1 million and $5.3
million, respectively. We expect to incur significant losses for at least the next several years, as we continue our research activities and conduct
development of, and seek regulatory approvals for, our product candidates.
21
Our ability to generate revenue from our current and any potential future product candidates and achieve profitability depends on our ability,
alone or with strategic partners, to complete the development of, and obtain the necessary regulatory and essential pricing and reimbursement approvals to
commercialize, our product candidates. We do not know when, if ever, we will generate revenues from sales of our product candidates.
Our expenses could increase beyond expectations if we are required by the FDA, the EMA, or other regulatory agencies, domestic or foreign, to
perform clinical and other studies in addition to those that we currently anticipate. Even if one or more of the product candidates that we develop is
approved for commercial sale, we may never generate revenue in amounts sufficient to achieve and maintain profitability.
There is substantial doubt about our ability to continue as a going concern. We will need to raise additional funding in the near term, which may not be
available on acceptable terms, if at all to continue as a going concern and advance our product candidates. Failure to obtain capital when needed may
force us to delay, limit or terminate our product development efforts or other operations. Raising additional capital may dilute our existing
shareholders, restrict our operations or cause us to relinquish valuable rights.
There is substantial doubt regarding our ability to continue as a going concern. As of December 31, 2024, we had unrestricted cash and cash
equivalents of approximately $3.2 million. Our management believes that such cash and cash equivalents will not be sufficient to fund our operating
expenses and capital requirements beyond the second quarter, whether or not we curtail efforts with respect to certain of our current and future product
candidates. We will require significant additional funding to advance any of our product candidates beyond the short term and to sustain our operations.
We may also seek to raise such capital through public or private financing of our securities, royalty financing or debt financing. Raising funds in
the current economic environment may be challenging, and such financing may not be available in sufficient amounts or on acceptable terms, if at all. The
terms of any financing may harm existing shareholders. The issuance of additional securities, whether equity or debt, or the possibility of such issuance,
may cause the market price of our shares to decline. The sale of additional equity or convertible securities may dilute the ownership of existing
shareholders.
If we sell shares or other equity securities in one or more other transactions, or issue stock, stock options or other securities pursuant to our
current equity plans, investors may be materially diluted by such subsequent issuances. We will need significant additional capital in the near term to
continue our current plans. No assurance can be given that we will be able to obtain such funds upon favorable terms and conditions, if at all. Failure to do
so could have a material adverse effect on our business. To the extent we raise additional capital by issuing equity securities, our stockholders may
experience substantial dilution. We may sell common stock, preferred stock, convertible securities or other equity or convertible securities in one or more
transactions that may include voting rights (including the right to vote as a series on particular matters), preferences as to dividends and liquidation,
antidilution, and conversion and redemption rights, subject to applicable law, and at prices and in a manner we determine from time to time. Such issuances
and the exercise of any convertible securities will dilute the percentage ownership of our stockholders and may affect the value of our capital stock and
could adversely affect the rights of the holders of such stock, thereby reducing the value of such stock. Moreover, any exercise of convertible securities
may adversely affect the terms upon which we will be able to obtain additional equity capital, since the holders of such convertible securities can be
expected to exercise them at a time when we would, in all likelihood, not be able to obtain any needed capital on terms more favorable to us than those
provided in such convertible securities.
Incurring debt would result in increased fixed payment obligations, and we may agree to restrictive covenants, such as limitations on our ability
to incur additional debt or limitations on our ability to acquire, sell or license intellectual property rights that could impede our ability to conduct our
business. In the event we are unable to raise financing, we may need to reduce or cease operations.
We also intend to seek funds through collaborations, strategic alliances, or licensing arrangements with third parties. Such agreements may
adversely impact retained rights to our assets, technologies, future revenue streams and programs, especially those that receive regulatory approval.
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Risks Related to Development and Clinical Testing of Our Products and Product Candidates
Our approach to the discovery and development of product candidates for the treatment of serious diseases may never lead to marketable products.
The development of drug therapies presents unique challenges, including an imperfect understanding of the biology, a frequent lack of
translatability of nonclinical study results in subsequent clinical trials and dose selection, and the product candidate having an effect that may be too small
to be detected using the outcome measures selected in clinical trials or if the outcomes measured do not reach statistical significance. Our future success is
highly dependent on the successful development of our technology and our current and any potential future product candidates. The scientific evidence to
support the feasibility of developing our current product candidates is both preliminary and limited. If we do not successfully develop and commercialize
product candidates, we will not become profitable and the value of our common stock may decline.
Research and development of biopharmaceutical products is inherently risky. We may encounter substantial delays in our activities, including our
clinical studies, or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities in the development of products
to treat patients with serious diseases.
Our business depends heavily on the successful development, clinical testing, regulatory approvals and commercialization of olinciguat
(optioned to CVCO) and praliciguat (out-licensed to Akebia), and any future potential product candidates we may acquire or license as well as both the
Transferred Assets product candidates we have sold to Tisento. Any of our current or potential product candidates will require regulatory approval.
Before obtaining regulatory approvals for the commercial sale of any of our product candidates, we must demonstrate through lengthy, complex
and expensive nonclinical and clinical studies that our product candidates are both safe and effective for use in each target indication. Each product
candidate must demonstrate an adequate benefit-risk profile for its intended use in its intended patient population. In some instances, significant variability
in safety or efficacy appear in different clinical studies of the same product candidate due to numerous factors, including changes in study protocols,
differences in the number and characteristics of the enrolled study participants, variations in the dosing regimen and other clinical study parameters or the
dropout rate among study participants. Product candidates in later stages of clinical studies often fail to demonstrate adequate safety and efficacy despite
promising nonclinical testing and early clinical studies. Companies in the biopharmaceutical industry often suffer significant setbacks in later-stage clinical
studies; most product candidates that begin clinical studies are never approved for commercialization by regulatory authorities. Favorable results in earlier
stage trials may not be replicated in later stage trials. If we fail to produce positive results in our clinical trials, the development timeline, regulatory
approval and commercialization prospects of our assets and, correspondingly, our business and financial prospects, would be materially adversely affected.
In the event of difficulties in enrolling participants in any clinical studies conducted on our product candidates, those clinical trials could be delayed or
prevented from proceeding.
Identifying and qualifying participants to participate in any clinical studies of our product candidates would be critical to the success of those
clinical trials. The timing of any clinical studies will depend in part on the speed at which participants can be recruited to participate in testing these product
candidates. Estimates of the prevalence of target indications may vary considerably. Determining the incidence of these conditions, including in specific
geographies or demographic groups, would be challenging. The lower the actual prevalence of these conditions, the more challenges would be encountered
enrolling participants in those clinical studies, which could delay development of those product candidates. Clinical trial enrollment may also encounter
difficulties for a variety of other reasons. The number of participants eligible for a clinical trial may be substantially limited by stringent eligibility criteria
in a study protocol, such as the inclusion of biomarker-driven identification or other highly specific criteria related to stage of disease progression or to
specific patient reported outcome measures. The number of participants required to power the statistical analysis of the study’s endpoints may be very large
leading to an extended enrollment period. Issues such as the proximity of participants to a study site, the complexity of the study design, the ability to
recruit investigators with appropriate skill and experience, competing clinical studies for similar therapies or targeting similar participants, perceptions of
the benefit-risk profile of the product candidate relative to other available therapies or product candidates, and ability to obtain and maintain institutional
review board, or IRB, or ethics committee, or EC, approvals
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and participant consents all could have a substantial impact on the timing of clinical trial enrollment. If sufficient participants cannot be enrolled in clinical
studies in a timely way, obtaining study results would be delayed, which may harm our business, prospects, financial condition and results of operations.
The regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time-consuming and inherently
unpredictable. If we, Akebia and any other future licensees, as applicable, are ultimately unable to obtain regulatory approval for the product
candidates, we will be unable to generate product revenue and our business will be substantially harmed.
A product candidate cannot be commercialized until the appropriate regulatory authorities have reviewed and approved the product candidate.
The time required to obtain approval by the FDA and comparable foreign regulatory authorities is unpredictable, typically takes many years following the
commencement of clinical studies and depends upon numerous factors, including the type and complexity of the product candidates involved. Regulatory
authorities have substantial discretion in the approval process and may refuse to accept an application for review or may decide that data are insufficient for
approval and require additional nonclinical, clinical, or other information (e.g., product quality data or manufacturing controls). No regulatory approval for
any of our product candidates we own, licensed to Akebia or sold to Tisento has been requested or obtained, and it is possible that none of these existing
product candidates or any product candidates we or our licensees or Tisento may seek to develop in the future will ever obtain regulatory approval.
Any ongoing clinical studies may not be completed on schedule, and any planned clinical studies may not begin on schedule, if at all. The
completion or commencement of clinical studies can be delayed or prevented for a number of reasons, including, among others:
•
the FDA or other regulatory bodies may not authorize us or our investigators to commence planned clinical studies, or require that ongoing
clinical studies be suspended through imposition of clinical holds;
•
negative results from ongoing studies or other industry studies involving product candidates modulating the same or similar mechanism of
action;
•
delays in reaching or failing to reach agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical
study sites, the terms of which can be subject to considerable negotiation and may vary significantly among different CROs and study sites;
•
inadequate quantity or quality of a product candidate or other materials necessary to conduct clinical studies, for example delays in the
manufacturing of sufficient supply of finished drug product;
•
difficulties obtaining EC or IRB approval(s) to conduct a clinical study at a prospective site or sites;
•
challenges in recruiting and enrolling participants in clinical studies, the proximity of participants to study sites, eligibility criteria for the
clinical study, the nature of the clinical study protocol, the availability of approved effective treatments for the relevant disease and
competition from other clinical study programs for similar indications;
•
severe or unexpected drug-related side effects experienced by participants in a clinical study;
•
the presence of unanticipated metabolites in participants in a clinical study may require considerable nonclinical and clinical assessment;
•
we, our licensees or Tisento may decide, or regulatory authorities may require the conduct of additional clinical studies or abandonment of
product development programs;
•
delays in validating, or inability to validate, any endpoints utilized in a clinical study;
•
the FDA or other regulatory bodies may disagree with a clinical study’s design and the interpretation of data from clinical studies, or may
change the requirements for approval even after it has reviewed and commented on the design for clinical studies;
•
reports from nonclinical or clinical testing of other competing candidates that raise safety or efficacy concerns;
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•
cutbacks in funding for the FDA may result in delays in reviewing and approving applications; and
•
difficulties retaining participants who have enrolled in a clinical study but may be prone to withdraw due to rigors of the clinical studies,
lack of efficacy, side effects, personal issues, or loss of interest.
Clinical studies may also be delayed or terminated as a result of ambiguous or negative interim results. In addition, a clinical study may be
suspended or terminated by us, our licensees, Tisento, the FDA or other comparable authorities, the IRBs or ECs overseeing a clinical study, a data and
safety monitoring board overseeing the clinical study, or other regulatory authorities due to a number of factors, including, among others:
•
failure to conduct the clinical study in accordance with regulatory requirements or clinical protocols;
•
inspection of the clinical study operations or study sites by the FDA or other regulatory authorities that reveals deficiencies or violations
that require undertaking corrective action, including in response to the imposition of a clinical hold;
•
unforeseen safety issues, including any that could be identified in ongoing studies, adverse side effects or lack of effectiveness;
•
changes in government regulations or administrative actions;
•
problems with clinical supply materials; and
•
lack of adequate funding to continue clinical studies.
Our product candidates may cause side effects or adverse events that are presented in the product labeling approved by regulatory authorities. Some
may result in label restrictions.
Our current and any potential future product candidates may cause serious side effects which could cause us, our licensees, Tisento, or regulatory
authorities to interrupt, delay or halt clinical studies and could result in restrictive label language or delay or denial of regulatory approval.
Changes in regulatory requirements, FDA guidance or unanticipated events during nonclinical studies and clinical studies of our product candidates,
which may result in changes to nonclinical or clinical study protocols or additional nonclinical or clinical study requirements, which could result in
increased costs and could delay development timelines.
Changes in regulatory requirements, FDA guidance or unanticipated events during nonclinical studies and clinical studies may force amendment
to nonclinical studies and clinical study protocols or the FDA may impose additional nonclinical studies and clinical study requirements. Amendments or
changes to clinical study protocols would require resubmission to the FDA and IRBs for review and approval, which may increase the cost or delay the
timing or successful completion of clinical studies. Similarly, amendments to nonclinical studies may increase the cost or delay the timing or successful
completion of those nonclinical studies. In the event of delays in completing, or the termination of, any of nonclinical or clinical studies, or if it is required
that additional nonclinical or clinical studies be conducted, the commercial prospects for product candidates may be harmed and our ability to generate
product revenue will be delayed for those product candidates we retain our out-license or to realize value in our equity position in Tisento.
Obtaining and maintaining regulatory approval of product candidates in one jurisdiction does not mean that there will be success in obtaining
regulatory approval of our product candidates in other jurisdictions.
In order to market any product outside of the United States, compliance with the numerous and varying safety, efficacy and other regulatory
requirements of other countries is required. Obtaining and maintaining regulatory approval of product candidates in one jurisdiction does not guarantee that
obtaining or maintaining regulatory approval in any other jurisdiction will be possible, but a failure or delay in obtaining regulatory approval in one
jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA or other comparable foreign regulatory
authority grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing,
marketing and promotion of the product candidate in those
25
countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United
States, including additional nonclinical or clinical studies, as studies conducted in one jurisdiction may not be accepted by regulatory authorities in other
jurisdictions. The marketing approval processes in other countries may implicate all of the risks detailed above regarding FDA approval in the United
States, as well as other risks. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be
approved for sale in that jurisdiction. In some cases, the price intended to be charged for a product candidate is also subject to approval.
Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and
costs and could delay or prevent the introduction of product candidates in certain countries. Failure to obtain marketing approval in other countries or any
delay or other setback in obtaining such approval would impair the ability to market product candidates in such countries. Any such impairment would
reduce the size of the potential market, which could have a material adverse impact on our business, prospects, financial condition and results of operations.
Data/market exclusivity may be more limited than we expect based upon the competitive landscape and other factors outside of our control that may
occur during development or after approval.
There are many types of data/market exclusivity mechanisms that we or our licensees may seek to secure for our product candidates. Many of
these have risk of loss of exclusivity if the competitive landscape changes or regulations are revised. If we, our licensees or Tisento seek and are awarded
orphan drug designation in the US and/or the EU based upon criteria in effect at the time, this designation may be rescinded if a similar drug or another
therapy that confers a significant benefit over these product candidates is subsequently approved. If these product candidates were to fail to obtain orphan
drug status, or lose such status after it is obtained, or the marketing exclusivity that such status provides, our business, prospects, financial condition and
results of operations could be materially harmed. There are other types of data/market exclusivity rights granted after approval that may not confer
exclusivity anticipated if the competitive landscape changes and our business, prospects, financial condition and results of operations could be materially
harmed.
Future pandemics may disrupt our business, including our development activities.
Many nations, including the United States, continue to implement mitigation measures that have in the past and may in the future limit our ability
to access patients and physicians at certain local clinical centers that are participating in any future development activities.
We may face limitations and difficulties enrolling patients in our planned and future clinical trials if the patient populations that are eligible for
our clinical trials are affected by the coronavirus and/or the COVID-19 vaccines or other pandemics. Any such restrictions at trial sites could delay any
future clinical studies. In addition, if the patients enrolled in any future clinical trials become infected with COVID-19 or other viruses, we may have more
adverse events and deaths in our clinical trials as a result. Vulnerable patients may be at a higher risk of contracting COVID-19 and other viruses may
experience more severe symptoms from the disease, adversely affecting our chances for regulatory approval or requiring further clinical studies. The
adverse effects that may occur from administration of vaccines to patients participating in our future clinical trials could adversely affect clinical trial
outcomes or data analysis. Furthermore, the extent to which the COVID-19 pandemic, or future outbreaks of infectious disease, hinders access to facilities,
procurement of resources, raw materials or components necessary for research studies or preclinical or clinical development is not fully predictable. Delays
and disruptions from the COVID-19 pandemic, or future outbreaks of infectious disease, may increase our capital needs while potentially interfering with
our access to capital.
Risks Related to Reliance on Licensees, Tisento and Other Third Parties
We may not succeed in our pursuit of capital, capabilities, and transactions for the development and commercialization of our future clinical stage
assets, which would affect our financial condition.
We are seeking capital, capabilities, and transactions to advance the development of product candidates we may acquire rights to in the future.
There can be no assurance that this process will result in any effective negotiations toward, reaching terms of, executing agreements relating to, or
completing any transaction or that any such transaction
26
will be successful. Failure to complete any of the foregoing efforts would materially adversely affect our business, prospects, financial condition and results
of operations.
Akebia may not be successful in developing any therapies through the praliciguat out-license and we may not realize any future revenue from the out-
license.
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 the pharmaceutical compound praliciguat and
other related products and forms thereof enumerated in such agreement. Under the agreement, Akebia is responsible for all research, development,
regulatory, and commercialization activities for certain products. On December 13, 2024, we and Akebia entered into Amendment #1 to License
Agreement (the “2024 Amendment”) to the original 2021 license agreement. Under the terms of the 2024 Amendment, Akebia paid the Company (i) $1.25
million in December 2024 and has agreed to pay an additional $0.5 million on or before September 30, 2025. In addition, Akebia has agreed to assume
control of the preparation, filing, prosecution and maintenance of certain Cyclerion patents, and the expenses associated therewith, at an earlier date than as
originally agreed between the parties. The parties have agreed to the reduction of certain development milestones and the increase of certain royalty rates
on net sales and sublicense income. Pursuant to the terms of the 2021 License Agreement, as amended, Akebia will pay Cyclerion tiered royalties ranging
from mid-single digit to twenty percent of net sales. Cyclerion’s obligations to deliver certain drug products have also ceased. The agreement may be
terminated by either party in the event of a material breach by the other party or by us in the event of certain patent disputes. There can be no assurances
that the agreement will result in any therapies or that it will not be terminated prior to the realization by us of any remaining eligible revenues or that
Akebia will be able to successfully bring any of the licensed product candidates to market due to financial limitations or other business factors in the future
or if Akebia is unable to raise additional capital on favorable terms, if at all. Akebia may at any time terminate the Akebia License Agreement upon 180
days written notice. subject to Akebia’s obligation to grant Cyclerion a non-exclusive, royalty-free license, with the right to grant multiple tiers of
sublicenses, to certain licensed compounds or products as defined in the Akebia License Agreement as well as certain rights to regulatory submissions,
product trademarks, contracts with third party suppliers and certain other rights.
Tisento may not be successful in developing any therapies and we may not realize any future value from the Tisento common stock we received under
the Asset Purchase Agreement with Tisento.
Our investment in Tisento is subject to all of the risks associated with an earlier stage biotechnology company. The pharmaceutical and
biotechnology industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. While we
believe that Tisento’s technology, development experience and scientific knowledge provide it with competitive advantages, it may face potential
competition from many different sources, including large pharmaceutical and biotechnology companies, academic institutions, government agencies and
other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for the research,
development, manufacturing and commercialization of similar products. Any investigational products that we successfully develop and commercialize will
compete with new immunotherapies that may become available in the future. As a result, our investment in Tisento is risky and our equity interest in
Tisento could be significantly diluted in the future if Tisento seeks to raise additional capital or is unable to raise additional capital on favorable terms, if at
all. If Tisento suffers adverse effects, it may not be able to continue as a going business concern, and we may lose our entire investment.
We lack operational control over Tisento.
Our investment in Tisento represents a minority or passive stake and we may have little to no participation, input or control over the
management, policies, and operations of Tisento. Further, we may lack sufficient ownership of voting securities to impact, without the vote of additional
equity holders, any matters submitted to stockholders or members of such business for a vote. There is inherent risk in making minority equity investments
in companies over which we have little to no control. Without control of the management and decision-making of these businesses, we cannot control their
direction, strategy, policies and business plans, and we may be powerless to improve any declines in their performance, operating results and financial
condition.
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Any collaboration or license arrangements that we enter into in the future may not be successful, which could impede our ability to develop and
commercialize our product candidates.
We may seek additional collaboration or license arrangements for the commercialization, and/or potentially for the development, of certain of
our product candidates depending on the merits of retaining commercialization rights for ourselves as compared to entering into collaboration or license
arrangements. We face significant challenges in seeking appropriate partners. Moreover, collaboration and license arrangements are complex and time-
consuming to negotiate, document, implement and maintain. We may not be successful in our efforts to establish and implement such arrangements. The
terms of any collaborations, licenses or other arrangements that we may establish may not be favorable to us.
Any future collaboration or license arrangements that we enter into may not be successful. The success of such arrangements will depend heavily
on the efforts and activities of our partners. Collaboration and license arrangements are subject to numerous risks, including that:
•
partners have significant discretion in determining the efforts and resources that they will apply to collaborations;
•
a partner with marketing, manufacturing and distribution rights to one or more products may not commit sufficient resources to or otherwise
not perform satisfactorily in carrying out these activities;
•
partners may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information
in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary
information or expose us to potential liability;
•
collaboration and license arrangements may be terminated, and, if terminated, this may result in a need for additional capital to pursue
further development or commercialization of the applicable current or any potential future product candidates;
•
partners may own or co-own intellectual property covering products that results from our collaborating with them, and in such cases, we
would not have the exclusive right to develop or commercialize such intellectual property;
•
disputes may arise with respect to the ownership of any intellectual property developed pursuant to our collaboration or license
arrangements; and
•
a partner’s sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal
proceedings.
We expect in the future to rely on third parties to conduct any nonclinical or clinical studies for any potential future product candidates. If these third
parties do not successfully carry out their contractual duties or meet expected deadlines, necessary regulatory approvals for or commercialization of
any potential future product candidates may not be obtainable and our business could be substantially harmed.
We do not have the infrastructure or internal resources and capabilities to independently conduct nonclinical or clinical studies. We expect to rely
on contract laboratories, medical institutions, clinical investigators, licensees and other third parties, such as CROs, to conduct nonclinical studies on any
future discovery compounds and product candidates and clinical studies on product candidates. We expect to rely heavily on such parties for execution of
nonclinical and clinical studies and as a result that we will only be able to control certain aspects of their activities. As a result, we expect we will have
limited direct control over the conduct, timing and completion of our nonclinical and clinical studies and the management of data developed through these
studies. Communicating with outside parties can also be challenging, potentially leading to mistakes as well as difficulties in coordinating activities.
Outside parties may have staffing difficulties, fail to comply with contractual obligations, experience regulatory compliance issues, undergo changes in
priorities, become financially distressed or form relationships with other entities, some of which may be our competitors.
These factors may materially impede the willingness or ability of third parties to complete quality nonclinical and clinical studies and may
subject us to unexpected cost increases that are beyond our control. Nevertheless, we may
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be responsible for ensuring that each of any future nonclinical and clinical studies is conducted in accordance with any applicable protocol, legal,
regulatory and scientific requirements and standards, and our reliance on CROs and other third parties does not necessarily relieve us of our regulatory
responsibilities. We, and any future CROs and other third parties are required to comply with regulations and guidelines, such as good laboratory practices
(GLPs), good clinical practices (GCPs), and current Good Manufacturing Practices. These regulations are enforced by the FDA and comparable foreign
regulatory authorities for any products in clinical development. The FDA enforces compliance to regulations through periodic inspections of clinical study
sponsors, principal investigators, and third parties. If the FDA determines there was a failure to comply with the regulations the clinical data generated in
any clinical studies may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require the performance of additional clinical
studies before approving any marketing applications. We cannot assure you that, upon inspection, the FDA will determine that any potential future
nonclinical studies, clinical studies or product manufacturing will comply with these regulations. Our failure or the failure of our CROs or other third
parties to comply with these regulations may require the repeat of those clinical studies, which would delay the regulatory approval process and could also
result in enforcement action up to and including civil and criminal penalties.
Although we or our current licensee or any future licensees may design or approve the designs of our product candidate clinical studies, CROs
and other third parties conduct those clinical studies. As a result, many important aspects of the execution of the development programs for our product
candidates may be outside of our direct control. In addition, the CROs, or other third parties, may not perform all of their obligations under arrangements
with us or our licensees or in compliance with regulatory requirements, but we may remain responsible and are subject to enforcement action that may
include civil penalties and criminal prosecution for any violations of FDA laws and regulations during the conduct of clinical studies. If the CROs, or our
licensees, do not perform clinical studies in a satisfactory manner, breach their obligations to us or fail to comply with regulatory requirements, the
development and commercialization of our product candidates may be delayed, or our development program materially and irreversibly harmed. We may
not be able to control the amount and timing of resources these CROs or our licensees devote to our clinical products.
If any relationships with these third-party CROs terminate, arrangements with alternative CROs may not be achievable. If CROs do not
successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced, or if the quality or accuracy of the
clinical data they obtain is compromised due to the failure to adhere to required clinical protocols, regulatory requirements or for other reasons, any clinical
studies such CROs are associated with may be extended, delayed or terminated, and required regulatory approval for or successfully commercialization of
our product candidates may not be obtainable. As a result, we believe that our financial results and the commercial prospects for our product candidates in
the approved indication would be harmed, our costs could increase and our ability to generate revenue could be delayed or lost.
Except as out-licensed, we must rely completely on third-party suppliers to manufacture any nonclinical and clinical drug supplies for our product
candidates, and we intend to rely on third parties to produce commercial supplies of any product candidates that are approved.
We do not currently have, nor do we plan to acquire, the infrastructure or capability to internally manufacture the drug supply of our current or
any potential future product candidates, for use in the conduct of our nonclinical and clinical studies. We lack the internal resources and the capability to
manufacture any product candidates on any scale. We expect to depend on third-party contract manufacturing organizations, or CMOs, for all our
requirements of raw materials, drug substances and drug product for any future nonclinical studies and clinical trials. We do not have long-term supply
agreements in place with any CMO and we expect that any potential future product candidates will be individually contracted under a services agreement
on a purchase order basis. We expect to rely on CMOs for the supply of later-stage development and commercialization, as well as for the supply of any
other discovery compounds or product candidates that we may identify, and we may not be able to enter into long-term supply agreements with such CMOs
on favorable terms. As a further result, we are subject to price fluctuations for any clinical drug supplies. If the prices charged by these CMOs increase, our
business, prospects, financial condition and results of operations could be materially harmed. We expect in the future to apply industry risk management
practices to minimize the impact to nonclinical and clinical timelines associated with delays to our clinical supplies. However, these delays could still lead
to clinical trials delays that could adversely impact our business.
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In addition, any facilities which may be used by contract manufacturers to manufacture the active pharmaceutical ingredient and final drug
product must complete a pre-approval inspection by the FDA and other comparable foreign regulatory agencies to assess compliance with applicable
requirements, including current GMP, after we submit our new drug application, or NDA, or relevant foreign regulatory submission to the applicable
regulatory agency. If the FDA or an applicable foreign regulatory agency determines now or in the future that these facilities are noncompliant, we may
need to find alternative manufacturing facilities, which would impede our ability to develop, obtain regulatory approval for or market our product
candidates.
Our anticipated reliance on third parties requires us to share our confidential information, including trade secrets and know-how, which increases the
possibility that our confidential information will be misappropriated or disclosed.
Because we seek to involve third party licensees and collaborators on current and potential future product candidates, we expect we will rely on
third parties to manufacture our product candidates, and because we expect to collaborate with various CROs and other third parties to conduct our
nonclinical studies and clinical trials, we must, at times, share our trade secrets or know-how with them. We seek to protect our confidential information,
including know-how and trade secrets, in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative
research agreements, consulting agreements or other similar agreements with our collaborators, advisors and consultants prior to beginning our
collaborations or disclosing confidential information to such parties. These agreements typically limit the rights of the third parties to use or disclose our
confidential information, such as trade secrets and know-how. Despite these contractual provisions, the need to share our confidential information with
third parties increases the risk that confidential information such as trade secrets and know-how becomes known by our competitors, is inadvertently
incorporated into the technology of others, or is disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on
our confidential information including know-how and trade secrets, a competitor's discovery of our confidential information or other unauthorized use or
disclosure could impair our competitive position and may have a material adverse effect on our business, prospects, financial condition and results of
operations.
Risks Related to Our Intellectual Property Rights
If we or our licensees or Tisento are unable to adequately protect proprietary technologies, or obtain and maintain issued patents that are sufficient to
protect their respective product candidates, others could compete against us, our licensees and Tisento more directly, which would have a material
adverse impact on our business, prospects, financial condition and results of operations.
Our success will depend in part on our and our licensees and Tisento’s ability to obtain and maintain patent and other proprietary protection in
the United States and other countries for commercially important technology, inventions and know-how related to our business, defend and enforce patents,
should they issue, preserve the confidentiality of trade secrets and operate without infringing the valid and enforceable patents and proprietary rights of
third parties. We strive to protect and enhance the proprietary technologies that we believe are important to our business, including seeking patents intended
to cover our product candidates and compositions, their methods of use and any other Inventions that are important to the development of our business.
We have 20 issued U.S. patents, eleven pending U.S. patents applications and numerous foreign patents and pending patent applications. Patent
families are filed either as utility U.S. patents or under an international patent law treaty (PCT) that provides a unified procedure for filing a single initial
patent application to seek patent protection for an invention simultaneously in each of the 157 contracting states, followed by the process of entering
national phase, which requires a separate application in each of the member states in which national patent protection is sought.
See “Business — Intellectual Property.” We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do
not consider appropriate for, patent protection.
The patent positions of biotechnology and pharmaceutical companies, including ours, involve complex legal and factual questions, which in
recent years have been the subject of much litigation, and, therefore, the issuance, scope, validity, enforceability and commercial value of any patent claims
that we may obtain cannot be predicted with certainty. Patent applications may not be granted as issued patents in any particular jurisdiction and, even if
they do,
30
these patents may not include claims with a sufficient scope to protect our product candidates or otherwise provide any competitive advantage.
Even if patent applications are issued, competitors and other third parties may infringe, misappropriate or otherwise violate patents and other
intellectual property rights. We may not be able to prevent infringement, misappropriation or other violations of intellectual property rights, particularly in
countries where the laws may not protect those rights as fully as in the United States. To counter infringement or unauthorized use, filing infringement
claims may be required, which can be expensive and time-consuming and divert the attention of management and key personnel from business operations.
Moreover, patents, if issued, may be challenged, deemed unenforceable, invalidated or circumvented in the United States and abroad. U.S.
patents and patent applications may also be subject to interference, derivation, ex-parte reexamination, post-grant review, or inter-partes review
proceedings, supplemental examination and challenges in district or other courts. Interference proceedings provoked by third parties or brought by us or our
licensees may be necessary to determine the priority of inventions with respect to patents or patent applications. An unfavorable outcome could require
ceasing the use of the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party
does not offer a license on commercially reasonable terms. Involvement in litigation or interference proceedings may fail and, even if successful, may
result in substantial costs, and distract management and other employees. Furthermore, an adverse decision in an interference or derivation proceeding can
result in a third party receiving the sought-out patent right, which in turn could affect the ability to develop, market or otherwise commercialize our product
candidates.
Patents may also be subjected to opposition, post-grant review or comparable proceedings lodged in various foreign, both national and regional,
patent offices or courts. Such proceedings could result in revocation or amendment of patents in such a way that they no longer cover our product
candidates or competitive products. In addition, such proceedings may be costly. Thus, any patents, should they issue, may not provide any protection
against competitors.
Furthermore, though a patent, if it were to issue, is presumed valid and enforceable, its issuance is not conclusive as to its validity or its
enforceability and it may not provide adequate protection to exclude competitors from making similar products. Even if a patent issues and is held to be
valid and enforceable, competitors may be able to design around or circumvent our patents, such as by using pre-existing or newly developed technology or
products in a non-infringing manner. If these developments were to occur, they could have a material adverse effect on our business, prospects, financial
condition and results of operations.
Any litigation to enforce or defend patent rights, even if successful, would be costly and time-consuming and would divert the attention of
management and key personnel from business operations. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded
if we were to prevail may not be commercially meaningful.
In addition, proceedings to enforce or defend any patents, if and when issued, put those patents at risk of being invalidated, held unenforceable or
not infringed, or interpreted narrowly. Such proceedings could also provoke third parties to assert counterclaims, including that some or all of the claims in
one or more patents are invalid, not infringed or unenforceable. Grounds for a validity challenge include alleged failures to meet any of several statutory
requirements, including lack of novelty, obviousness or non-enablement. Grounds for unenforceability assertions of a patent include allegations that
someone connected with prosecution of the patent application that matured into the patent withheld relevant information from the U.S. Patent and
Trademark Office, or the USPTO, or made a misleading statement, during prosecution of the patent application. In an infringement proceeding, a court may
disagree with allegations and refuse to stop the other party from using the technology at issue on the grounds that patents do not cover the technology in
question or may decide that a patent is invalid or unenforceable. An adverse result in any litigation, defense or post-grant proceedings could result in one or
more patents being invalidated or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with
intellectual property litigation, there is a risk that some confidential information could be compromised by disclosure during this type of litigation. There
could also be public announcements of the results of hearings, motions or other interim
31
proceedings or developments. If securities analysts or investors perceive these results to be negative, it would have a material adverse effect on the price of
our common stock.
The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to validity, for example, there cannot be
certainty that there is no invalidating prior art, of which we, our licensees and the patent examiner were unaware during prosecution. If a defendant were to
prevail on a legal assertion of invalidity and/or unenforceability, at least part, and perhaps all, of the patent protection on our product candidates could be
lost.
If any patents, if and when issued, covering our product candidates are invalidated or found not infringed or unenforceable, our business,
prospects, financial condition and results of operations could be materially harmed.
We may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and stop us from
commercializing or increase the costs of commercializing our product candidates, if approved.
Our success will depend in part on our ability to operate without infringing, misappropriating or otherwise violating the intellectual property and
proprietary rights of third parties. Other parties may allege that our product candidates or the use of our technologies infringes or otherwise violates patent
claims or other intellectual property rights held by them or that we are employing their proprietary technology without authorization. There may be third-
party patents or patent applications with claims to compositions, materials, formulations, methods of manufacture or methods for treatment related to our
product candidates. Because patent applications can take many years to issue, third parties may have currently pending patent applications which may later
result in issued patents that our product candidates may infringe, or which such third parties claim are infringed by our technologies.
The pharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights. Patent and other
types of intellectual property litigation can involve complex factual and legal questions, and their outcome is uncertain and cannot be adequately quantified
in advance. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we are sued for patent
infringement, we would need to demonstrate that our product candidates, products or methods either does not infringe the patent claims of the relevant
patent or that the patent claims are invalid or unenforceable, and we may not be able to do this. Even if we are successful in these proceedings, we may
incur substantial costs and the time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could
have a material adverse effect on our business and operating results. In addition, we may not have sufficient resources to bring these actions to a successful
conclusion.
If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge
the validity of the patents in court, or redesign our product candidates. In addition, if any such claim were successfully asserted against us and we could not
obtain such a license, we may be forced to stop or delay developing, manufacturing, selling or otherwise commercializing our product candidates. Any
claim relating to intellectual property infringement that is successfully asserted against us may require us to pay substantial damages, including treble
damages and attorneys’ fees if we are found to be willfully infringing another party’s patents, for past use of the asserted intellectual property and royalties
and other consideration going forward if we are forced to take a license.
Any of these risks coming to fruition could have a material adverse effect on our business, prospects, financial condition and results of
operations.
We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.
Our employee, consultants, non-academic outside scientific collaborators and other advisors enter into confidentiality and intellectual property
assignment agreements with us or have entered into confidentiality and intellectual property assignment agreements with Ironwood. We seek to have
inventions assigned to us by the parties rendering services whenever possible. However, we may not be able to enter into these agreements with all parties
(for
32
example with academic collaborators) or these agreements may not be honored and may not effectively assign intellectual property rights to us.
Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such
claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable
intellectual property, or we may have to in-license intellectual property owned by another party. Such an outcome could have a material adverse effect on
our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and
other employees.
Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other
requirements imposed by governmental patent agencies and patent protection could be reduced or eliminated for non-compliance with these
requirements.
The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and
other similar provisions over the lifetime of owned patents and applications. In some cases, an inadvertent lapse can be cured by payment of a late fee or by
other means in accordance with the applicable rules. However, there are situations in which noncompliance can result in abandonment or lapse of the patent
or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors or other third parties
might be able to enter the market earlier than would otherwise have been the case and this circumstance could have a material adverse effect on our
business, prospects, financial condition and results of operations.
We and our licensees and Tisento may not seek to protect our intellectual property rights in all jurisdictions throughout the world and we may not be
able to adequately enforce our intellectual property rights even in the jurisdictions where we seek protection.
The statutory deadlines for pursuing patent protection in individual foreign jurisdictions are based on the priority date of each of our patent
applications and we may not timely file foreign patent applications. Thus, for each of the patent families that are believed to provide coverage for our
product candidates, we, and our licensees, will need to decide whether and where to pursue protection outside the United States. Filing and prosecuting
patent applications and defending patents on product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive,
and so it is unlikely to pursue and maintain patents in all countries worldwide. As such, competitors may use technologies in jurisdictions where patent
protection is not pursued and obtained to develop their own products.
The laws of some foreign countries may not protect intellectual property rights to the same extent as the laws of the United States. Consequently,
it may not be possible to prevent third parties from practicing our inventions in all countries outside the United States even if there is a patent in that
jurisdiction. Further, a competitor may export otherwise infringing products to territories where patent protection exists, but enforcement is not as strong as
that in the United States. These products may compete with our product candidates and patents or other intellectual property rights may not be effective or
sufficient to prevent them from competing. Even pursuing and obtaining issued patents in particular jurisdictions, patent claims or other intellectual
property rights may not be effective or sufficient to prevent third parties from so competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions.
The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection,
especially those relating to biotechnology or pharmaceuticals. This could make it difficult to stop the infringement of patents, if obtained, or the
misappropriation of or marketing of competing products in violation of other intellectual property rights. For example, many foreign countries have
compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents
against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Patent
protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes.
Accordingly, patent protection might not be sought in certain countries, and there will not be a benefit of patent protection in such countries.
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Proceedings to enforce patent rights in foreign jurisdictions could result in substantial costs and divert efforts and attention from other aspects of
our business, could put patents at risk of being invalidated or interpreted narrowly, could put patent applications at risk of not issuing, and could provoke
third parties to assert claims. We, or our licensees, may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may
not be commercially meaningful. Accordingly, efforts to enforce intellectual property rights around the world may be inadequate to obtain a significant
commercial advantage from the intellectual property that developed or licensed.
If we, or our licensees, do not obtain additional protection under the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-
Waxman Act, and similar foreign legislation by extending the patent terms and obtaining data exclusivity for our product candidates, our business,
prospects, financial condition and results of operations may be materially harmed.
Depending upon the timing, duration and specifics of FDA marketing approval of our product candidates, one or more of the U.S. patents owned
may be eligible for a limited patent term extension under the Hatch-Waxman Act, which permits a patent term extension as compensation for patent term
lost during the FDA regulatory review process. A maximum of five years can be restored to the eligible patent. In all cases, the total patent life for the
product with the patent extension cannot exceed 14 years from the product's approval date, or in other words, 14 years of potential marketing time.
However, an extension might not be granted because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of
relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded
could be less than we request. If unable to obtain a patent term extension or the term of any such extension is less than we request, the duration of patent
protection obtained for our product candidates may not provide any meaningful commercial or competitive advantage, competitors may obtain approval of
competing products earlier than they would otherwise be able to do so, and our ability to generate revenues could be harmed.
Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.
As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and
enforcing patents in the biotechnology industry involves both technological and legal complexity, and is therefore costly, time-consuming and inherently
uncertain. In addition, the United States has recently enacted and is currently implementing wide-ranging patent reform legislation: the Leahy-Smith
America Invents Act, or the America Invents Act. The America Invents Act includes a number of significant changes to U.S. patent law. These provisions
affect the way patent applications will be prosecuted and may also affect patent litigation. It is not yet clear what, if any, impact the America Invents Act
will have on the operation of our business. However, the America Invents Act and its implementation could increase the uncertainties and costs
surrounding the prosecution of our patent applications and the enforcement or defense of any patents that may issue from our patent applications, all of
which could have a material adverse effect on our business, prospects, financial condition and results of operations.
In addition to increasing uncertainty with regard to our ability to obtain future patents, this combination of events has created uncertainty with
respect to the value of patents once obtained. Depending on these and other decisions by the U.S. Congress, the federal courts and the USPTO, the laws and
regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce any patents that may
issue in the future.
We may be subject to damages resulting from claims that we or our employees, consultants or advisors have wrongfully used or disclosed alleged trade
secrets of their current or former employers.
Our current employee and any employees we may hire in the future may have been previously employed at other biotechnology or
pharmaceutical companies, including our competitors or potential competitors. We also engage and, in the future, intend to engage advisors and consultants
who are concurrently employed at universities or who perform services for other entities.
We may be subject to claims that we or our employees, advisors or consultants have inadvertently or otherwise used or disclosed intellectual
property, including trade secrets or other proprietary information, of a former
34
employer or other third party. We may be subject to claims that an employee, advisor or consultant performed work for us that conflicts with that person's
obligations to a third party, such as an employer, and thus, that the third party has an ownership interest in the intellectual property arising out of work
performed for us. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could
result in substantial costs and be a distraction to management. If we fail in defending such claims, in addition to paying money claims, we may lose
valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to commercialize our
product candidates, which would materially harm our commercial development efforts.
Risks Related to the Future Commercialization of Our Current or Potential Future Product Candidates
The incidence and prevalence for target patient populations of our current and any potential future product candidates we may acquire have not been
established with precision. If the market opportunities for our current and potential future product candidates are smaller than we estimate, or if any
approval that we obtain is based on a narrower definition of the patient population, our revenue and ability to achieve profitability may be harmed.
The incidence and prevalence for all the conditions we aim to address with our current and any potential future programs vary considerably.
Projections of both the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from
treatment with our product candidates, are based on beliefs and estimates. These estimates have been derived from a variety of sources, including scientific
literature, surveys of clinics, patient foundations or market research, and may prove to be incorrect. Further, new trials may change the estimated incidence
or prevalence of these diseases. The total addressable market across all of our product candidates will ultimately depend upon, among other things, the
diagnosis criteria included in the final label for each of our product candidates, if approved for sale for these indications, acceptance by the medical
community and patient access, drug pricing and reimbursement. The number of patients in the United States and other major markets and elsewhere may
turn out to be lower than expected, patients may not be otherwise amenable to treatment with our product candidates or new patients may become
increasingly difficult to identify or gain access to, all of which would harm our results of operations and our business. Further, even if significant market
share for our product candidates is obtained, because the potential target populations are very small, we may never achieve profitability despite obtaining
such significant market share.
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market any product candidates, if
approved, we may not be successful in commercializing those product candidates if and when they are approved.
We do not currently have an infrastructure for the sale, marketing, market access, patient service and distribution of pharmaceutical products. In
order to market our product candidates, if approved by the FDA or any other regulatory authority outside the United States, we must build our sales,
marketing, managerial and other non-technical capabilities, or arrange with third parties to perform these services. There are risks involved with both
establishing our own commercial capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and
training a sales force or reimbursement specialists is expensive and time-consuming and could delay any product candidate launch. If commercialization is
delayed or does not occur, we would have prematurely or unnecessarily incurred such expenses. This may be costly, and our investment would be lost if we
cannot retain or reposition our commercialization personnel.
If we enter into arrangements with third parties to perform sales, marketing, commercial support and distribution services, any product candidate
revenue or the profitability of that revenue may be lower than if we were to market and sell any products we may develop ourselves. In addition, we may
fail to enter into arrangements with third parties to commercialize our product candidates or may be unable to do so on terms that are favorable to us. We
may have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our product
candidates effectively. If we do not establish commercialization capabilities successfully, either on our own or in collaboration with third parties, or if we
are unable to do so on commercially reasonable terms, we will not be successful in commercializing our product candidates if approved and our business,
prospects, financial condition and results of operations will be materially harmed.
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Even if we obtain regulatory approval for our product candidates, our product candidates may not achieve broad market acceptance by patients,
physicians, healthcare payors or others in the medical community, which would limit the revenue that we generate from their sales.
The future commercial success of our product candidates, if approved by the FDA or other applicable regulatory authorities outside the United
States, will depend upon the awareness and acceptance of our product candidates among the medical community, including patients, physicians and
healthcare payors. If any of our product candidates are approved but do not achieve an adequate level of acceptance by patients, physicians, healthcare
payors and others in the medical community, we may not generate sufficient revenue to become, or remain, profitable. Market acceptance of our product
candidates, if approved, will depend on a number of factors, including, among others:
•
the efficacy and safety of our approved product candidates as demonstrated in clinical trials;
•
the clinical indications and labeling claims for our product candidates that are approved;
•
limitations or warnings contained in the labeling approved for our product candidates by the FDA or other applicable regulatory authorities;
•
any restrictions on the use of our product candidates together with other medications or restrictions on the use of our products in certain
types of patients;
•
the prevalence and severity of any adverse effects associated with our product candidates;
•
the size of the target patient population, and the willingness of the target patient population to try new therapies and of physicians to
prescribe these therapies;
•
the safety, efficacy, cost and other potential advantages of our approved product candidates compared to other available therapies;
•
our ability to generate cost effectiveness data that supports a profitable price;•our ability to obtain sufficient reimbursement and pricing by
third-party payors and government authorities;•the willingness of patients to pay out-of-pocket in the absence of sufficient payor
coverage;•the effectiveness of our sales and marketing strategies; or
•
publicity concerning our product candidates or competing products and treatments.
If our product candidates are approved but do not achieve an adequate level of acceptance by patients, physicians and payors, we may not
generate sufficient revenue from our product candidates to become or remain profitable. Before granting reimbursement approval, healthcare payors may
require us to demonstrate that our product candidates, in addition to treating these target indications, also provide incremental health benefits to patients.
Efforts to educate the medical community and third-party payors about the benefits of our product candidates may require significant resources and may
never be successful.
Reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it difficult for us to sell our
product candidates profitably. Price controls may be imposed in certain markets, which may harm our future profitability.
Market acceptance and sales of any approved product candidates will depend significantly on the availability of adequate coverage and
reimbursement from third-party payors and government authorities and may be affected by existing and future health care reform measures and cost-cutting
measures at the federal and state level currently proposed for Medicaid and other programs. Government authorities and third-party payors, such as private
health insurers and health maintenance organizations, decide which drugs they will pay for and establish reimbursement levels. Reimbursement by a third-
party payor may depend upon a number of factors, including the third-party payor's determination that use of a product is: a covered benefit under its health
plan; safe, effective and medically necessary; appropriate for the specific patient; cost-effective; and neither experimental nor investigational.
Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time consuming and costly
process that could require the provision of supporting scientific, clinical and cost-effectiveness data for the use of our product candidates to the payor. We
or our partners may not be able to provide
36
data sufficient to gain acceptance with respect to coverage and reimbursement. We cannot be sure that coverage or adequate reimbursement will be
available for any of our product candidates. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our
product candidates. If reimbursement is not available or is available only to limited levels, we may not be able to commercialize certain of our product
candidates. In addition, in the United States, third-party payors are increasingly attempting to contain health care costs by limiting both coverage and the
level of reimbursement of new drugs. As a result, significant uncertainty exists as to whether and how much third-party payors will reimburse patients for
their use of newly approved drugs, which in turn will put pressure on the pricing of drugs.
In some countries, particularly member states of the European Union, the pricing of prescription drugs is subject to governmental control. In
these countries, pricing negotiations with governmental authorities can take considerable time after receipt of marketing approval for a product. In addition,
there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment
measures. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after
reimbursement has been obtained. Reference pricing used by various European Union member states and parallel distribution, or arbitrage between low-
priced and high-priced member states, can further reduce prices. In some countries, we or our partners may be required to conduct a clinical trial or other
studies that compare the cost-effectiveness of our product candidates to other available therapies in order to obtain or maintain reimbursement or pricing
approval. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country
of publication and other countries. If reimbursement of our product candidates is unavailable or limited in scope or amount, or if pricing is set at
unsatisfactory levels, our business could be harmed.
If we fail to comply with healthcare and other regulations, we could face substantial penalties and our business, prospects, financial condition and
results of operations could be harmed.
Any product candidates that we may evaluate in clinical studies are subject to certain federal and state healthcare laws and regulations that may
affect our business. These laws and regulations include:
•
federal healthcare program anti-kickback laws, which prohibit, among other things, persons from offering, soliciting, receiving or providing
remuneration, directly or indirectly, as an inducement or reward for their past, current or potential future prescribing, purchase, use,
recommending for use, referral, formulary placement, or dispensing of our product candidates;
•
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which prohibits executing a scheme to defraud any
healthcare benefit program or making false statements relating to healthcare matters and which also imposes certain requirements relating to
the privacy, security and transmission of individually identifiable health information;
•
the Federal Food, Drug, and Cosmetic Act, which among other things, strictly regulates drug product and medical device research,
development, and marketing, prohibits manufacturers from marketing or promoting such products prior to approval; and
•
state law equivalents of the above federal laws, such as anti-kickback laws, state transparency laws, state laws limiting interactions between
pharmaceutical manufacturers and members of the healthcare industry and state laws governing the privacy and security of health
information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by federal laws,
thus complicating compliance efforts.
In addition, we may be subject to privacy and security laws in the various jurisdictions in which we operate, obtain or store personally
identifiable information. For example, if we conduct clinical studies in any of the member states of the European Union, the processing of personal data in
the European Economic Area, or the EEA, is subject to the 1995 Data Protection Directive, imposing strict obligations and restrictions on the ability to
collect, analyze and transfer personal data. In May 2018, the General Data Protection Regulation, or the GDPR, took effect, increasing our obligations with
respect to clinical studies conducted in the EEA and increasing the scrutiny applied by clinical study sites located in the EEA to transfers of personal data
from such sites to countries that are considered by the European Commission to lack an adequate level of data protection, such as the United States. The
compliance obligations
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imposed by the GDPR may increase our cost of doing business. In addition, the GDPR imposes substantial fines for breaches of data protection
requirements, and it confers a private right of action on data subjects for breaches of data protection requirements.
If our operations are found to be in violation of any of the laws described above or any other laws, rules or regulations that apply to us, we will
be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations. Any penalties,
damages, fines, curtailment or restructuring of our operations could impede our ability to operate our business and our financial results. We cannot be
certain that compliance programs will address all areas of potential exposure and the risks in this area cannot be entirely eliminated, particularly because
the requirements and government interpretations of the requirements in this space are constantly evolving. Any action against us for violation of these laws,
rules or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from
the operation of our business, as well as damage our business or reputation. Moreover, achieving and sustaining compliance with applicable federal and
state privacy, security, fraud and reporting laws may prove costly.
We face significant competition in an environment of rapid technological and scientific change, and our competitors may achieve regulatory approval
before us or develop therapies that are safer, more advanced or more effective than ours, which may harm our ability, or a licensee's ability, to
successfully market or commercialize any product candidates we may develop and ultimately harm our financial condition.
Our future success depends on our ability, or a licensee's ability, to demonstrate and maintain a competitive advantage with respect to the design,
development and commercialization of our product candidates. In many cases, our product candidates that may be commercialized will compete with
existing, market-leading products. The development and commercialization of new drug products is highly competitive. We may face competition with
respect to any product candidates that are developed or commercialized in the future from major pharmaceutical companies, specialty pharmaceutical
companies and biotechnology companies worldwide. Potential competitors also include academic institutions, government agencies and other public and
private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development,
manufacturing, and commercialization.
If our product candidates do not obtain regulatory approvals in target indications prior to these or any other competing product candidates, or if
our product candidates do not demonstrate superior efficacy, safety or tolerability compared to these and any other approved therapeutics for our target
indications, then those product candidates may not be able to compete effectively.
Many of our current or potential competitors, either alone or with their strategic partners, have significantly greater financial resources and
expertise in research and development, manufacturing, nonclinical testing, conducting clinical studies, obtaining regulatory approvals and marketing
approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being
concentrated among a smaller number of our competitors. Our commercial opportunity could be reduced or eliminated if our competitors develop and
commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products
that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for
ours and may obtain orphan product exclusivity from the FDA for indications our product candidates are targeting, which could result in our competitors
establishing a strong market position before we are able to enter the market.
In addition, we or our licensees could face litigation or other proceedings with respect to the scope, ownership, validity and/or enforceability of
our patents relating to our competitors' products and our competitors may allege that our product candidates infringe, misappropriate or otherwise violate
their intellectual property. The availability of our competitors' products could limit the demand, and the price that could be charged, for any of our product
candidates that may be developed and commercialized. See “—Risks Related to Our Intellectual Property Rights.”
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The impact of healthcare reform and other governmental and private payor initiatives, as well as the Inflation Reduction Act of 2022 may harm our
business.
Our revenue prospects could be affected by changes in healthcare spending and policy in the United States and abroad. We operate in a highly
regulated industry and new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or decisions, related to health care
availability, the method of delivery or payment for health care products and services could harm our business, operations and financial condition. There is
significant interest in promoting health care reform, as evidenced by the enactment in the United States of the Patient Protection and Affordable Care Act
and the Health Care and Education Reconciliation Act in 2010 and in reducing the costs of certain prescription drugs as evidenced by the Inflation
Reduction Act of 2022. It is likely that federal and state legislatures within the United States and foreign governments will continue to consider changes to
existing health care legislation. We cannot predict the reform initiatives that may be adopted in the future or whether initiatives that have been adopted will
be repealed or modified. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare
services to contain or reduce costs of healthcare may adversely affect: the demand for any drug products for which we may obtain regulatory approval; our
ability to set a price that we believe is fair for our product candidates; our ability to obtain coverage and reimbursement approval for a product; our ability
to generate revenues and achieve or maintain profitability; and the level of taxes that we are required to pay.
Our future growth may depend, in part, on our, or a licensee's, ability to commercialize any current and potential future product candidates outside the
United States, where we would be subject to additional regulatory burdens and other risks and uncertainties.
Our future profitability may depend, in part, on our or a licensee's ability to commercialize our current and any potential future product
candidates outside the United States for which we may rely on partnerships with third parties. If we commercialize our product candidates outside the
United States, we would be subject to additional risks and uncertainties, including:
•
the customers' ability to obtain reimbursement for our product candidates outside the United States;
•
the ability to gain reimbursement in foreign markets at a price that is profitable;
•
the inability to directly control commercial activities because we are relying on third parties;
•
the burden of complying with complex and changing foreign regulatory, tax, accounting and legal requirements;
•
different medical practices and customs in foreign countries affecting acceptance in the marketplace;
•
import or export licensing requirements;
•
longer accounts receivable collection times;
•
longer lead times for shipping;
•
language barriers for technical training;
•
reduced protection of intellectual property rights in some foreign countries;
•
the existence of additional potentially relevant third-party intellectual property rights;
•
foreign currency exchange rate fluctuations; and
•
the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute.
Foreign sales of our product candidates could also be harmed by the imposition of governmental controls, political and economic instability,
trade restrictions and changes in tariffs.
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Our ability to generate meaningful revenues in jurisdictions outside of the United States may be limited due to the strict price controls and
reimbursement limitations imposed by governments outside of the United States.
In some countries, particularly in the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these
countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a drug. To obtain
coverage and reimbursement or pricing approval in some countries, we or our licensees may be required to conduct a clinical trial that compares the cost-
effectiveness of our product candidate to other available therapies, or to meet other criteria for pricing approval. If reimbursement of a product candidate, if
approved, is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business, prospects, financial condition and results of
operations could be harmed.
If any of our product candidates obtain regulatory approval, additional competitors could enter the market with generic versions of such drugs, which
may result in a material decline in sales of affected products.
Under the Hatch-Waxman Act, a pharmaceutical manufacturer may file an abbreviated new drug application, or an ANDA, seeking approval of a
generic copy of an approved, small-molecule innovator product. Under the Hatch-Waxman Act, a manufacturer may also submit an NDA that references
the FDA's prior approval of the small-molecule innovator product. The Hatch-Waxman Act also provides for certain periods of regulatory exclusivity.
These include, subject to certain exceptions, the period during which an FDA-approved drug is subject to orphan drug exclusivity. In addition to the
benefits of regulatory exclusivity, an innovator NDA holder may have patents claiming the active ingredient, product formulation or an approved use of the
drug, which would be listed with the product in the FDA publication, "Approved Drug Products with Therapeutic Equivalence Evaluations," known as the
"Orange Book." If there are patents listed in the Orange Book, a generic or NDA applicant that seeks to market its product before expiration of the patents
must include in the ANDA a "Paragraph IV certification," challenging the validity or enforceability of, or claiming non-infringement of, the listed patent or
patents.
Accordingly, if any of our product candidates are approved, competitors could file ANDAs for generic versions of our small-molecule drug
products or NDAs that reference our small-molecule drug products, respectively. If there are patents listed for our small-molecule drug products in the
Orange Book, those ANDAs and NDAs would be required to include a certification as to each listed patent indicating whether the ANDA applicant does or
does not intend to challenge the patent. We cannot predict which, if any, patents in our current portfolio or patents we may obtain in the future will be
eligible for listing in the Orange Book, how any generic competitor would address such patents, whether we would sue on any such patents, or the outcome
of any such suit.
We may not be successful in securing or maintaining proprietary patent protection for products and technologies we or our licensees may
develop or license. Moreover, if any of our patents that are listed in the Orange Book are successfully challenged by way of a Paragraph IV certification
and subsequent litigation, the affected product could immediately face generic competition and its sales would likely decline rapidly and materially.
Risks Related to Our Business Operations
Our prospects for success depend on our ability to retain Regina Graul, our President and Chief Executive Officer and in the future to attract, retain
and motivate qualified personnel.
We are highly dependent on Regina Graul, Ph.D. who is currently our sole employee. Despite our efforts to retain valuable employees, members
of our management, scientific and development teams may terminate their employment with us on short notice. Our success also depends on our ability in
the future to attract, retain and motivate highly skilled junior, mid-level and senior managers as well as junior, mid-level and senior scientific and medical
personnel.
We may not be able to attract or retain qualified management and scientific personnel in the future due to the competition for a limited number of
qualified personnel among biopharmaceutical, biotechnology, pharmaceutical and other businesses. Many of the other pharmaceutical companies that we
compete against for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than we do.
They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high
quality candidates than what we may be able to offer. The failure to succeed in nonclinical
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or clinical studies may make it more challenging to recruit and retain qualified personnel. In addition, in order to induce employees to continue their
employment with us, we have provided equity awards that vest over time and the value to our employees of such equity awards may be significantly
affected by movements in our stock price that are beyond our control and may be at any time insufficient to counteract more lucrative offers from other
companies. If we are unable to attract and retain high quality personnel, the rate and success at which we can develop and commercialize product
candidates will be limited.
We face potential product liability exposure, and, if claims are brought against us, we may incur substantial liability.
The use of our current and any potential future product candidates in clinical studies and any sale thereof, if approved, exposes us to the risk of
product liability claims. Product liability claims might be brought against us by patients, healthcare providers or others selling or otherwise coming into
contact with our product candidates. For example, we may be sued if any such product candidate we develop allegedly causes injury or is found to be
otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in
manufacturing, defects in design, a failure to warn of dangers inherent in the product, including as a result of interactions with alcohol or other drugs,
negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we become subject to product
liability claims and cannot successfully defend ourselves against them, we could incur substantial liabilities. In addition, regardless of merit or eventual
outcome, product liability claims may result in, among other things: withdrawal of subjects from our clinical studies; substantial monetary awards to
patients or other claimants; decreased demand for our product candidates or any future product candidates following marketing approval, if obtained;
damage to our reputation and exposure to adverse publicity; increased FDA warnings on product labels; litigation costs; distraction of management's
attention from our primary business; loss of potential revenue; and the inability to successfully commercialize our product candidates or any potential
future product candidates, if approved.
We maintain product liability insurance coverage for our clinical studies through both domestic and international insurance policies, subject to an
annual coverage limit. Nevertheless, our insurance coverage may be insufficient to reimburse us for any expenses or losses we may suffer if a judgment or
settlement exceeds available insurance proceeds. Moreover, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in
sufficient amounts to protect us against losses, including if insurance coverage becomes increasingly expensive. If and when we obtain marketing approval
for our product candidates, we intend to expand our insurance coverage to include the sale of commercial products; however, we may not be able to obtain
this product liability insurance on commercially reasonable terms. Large judgments have been awarded in class action lawsuits based on drugs that had
unanticipated side effects. The cost of any product liability litigation or other proceedings, even if resolved in our favor, could be substantial, particularly in
light of the size of our business and financial resources. A product liability claim or series of claims brought against us could cause our stock price to
decline and, if we are unsuccessful in defending such a claim or claims and the resulting judgments exceed our insurance coverage, our business, prospects,
financial condition and results of operations could be materially harmed.
During the course of treatment, patients may suffer adverse events, including death, for reasons that may or may not be related to our product
candidates. Such events could subject us to costly litigation, require us to pay substantial amounts of money to injured patients, delay, negatively impact or
end our opportunity to receive or maintain regulatory approval to market our product candidates, if approved, or require us to suspend or abandon our
commercialization efforts of any approved product candidates. Even in a circumstance in which we do not believe that an adverse event is related to our
product candidates, the investigation into the circumstance may be time-consuming or inconclusive. These investigations may interrupt our sales efforts,
delay our regulatory approval process, or impact and limit the type of regulatory approvals our product candidates receive or maintain. As a result of these
factors, a product liability claim, even if successfully defended, could have a material adverse effect on our business, prospects, financial condition and
results of operations.
If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which
could result in sanctions or other penalties that would harm our business.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, or The Exchange Act, the Sarbanes-Oxley Act of 2002, or
the Sarbanes-Oxley Act, and the rules and regulations of the Nasdaq Capital
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Market. We are a “smaller reporting company.” For so long as we remain a smaller reporting company, we will be exempt from Section 404(b) of the
Sarbanes-Oxley Act, which requires auditor attestation to the effectiveness of internal control over financial reporting. As a smaller reporting company, we
are exempt from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive
because we may rely on the exemptions available to us as a smaller reporting company. If some investors find our common stock less attractive as a result,
there may be a less active trading market for our common stock and our stock price may be more volatile.
We are, however, subject to Section 404(a) of the Sarbanes-Oxley Act. Beginning with our annual report on Form 10-K for the fiscal year ended
December 31, 2024, we must include a management assessment of the effectiveness of our internal control over financial reporting. As of the expiration of
our smaller reporting company status, we will be broadly subject to enhanced reporting and other requirements under the Exchange Act and Sarbanes-
Oxley Act. We have engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In
this regard, we will need to continue to dedicate internal resources, engage outside consultants and adopt a detailed work plan to assess and document the
adequacy of internal control over financial reporting, continue steps to improve control processes, validate through testing that controls are functioning as
documented and implement a continuous reporting and improvement process for internal control over financial reporting. There can be no assurances that
in future periods we will be able to timely conclude that our internal control over financial reporting is effective as required by Section 404(a).
We may discover weaknesses in our system of internal financial and accounting controls and procedures that could result in a material
misstatement of our financial statements. Our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system,
no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Because of
the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not
occur or that all control issues and instances of fraud will be detected.
If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain
proper and effective internal controls over financial reporting, we may not be able to produce timely and accurate financial statements. If that were to
happen, our business, prospects, financial condition and results of operations could be harmed, our investors could lose confidence in our reported financial
information, the market price of our stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities.
Unfavorable global economic and political conditions could harm our business, prospects, financial condition and results of operations.
Our results of operations could be harmed by general conditions in the global economy and in the global financial markets as well as adverse
economic conditions caused by political unrest. A severe or prolonged economic downturn and severe political disruption could result in a variety of risks
to our business, including weakened demand for our product candidates and our ability to raise additional capital when needed on acceptable terms, if at all.
A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption. Any of the foregoing could harm our business,
prospects, financial condition and results of operations.
If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse
impacts resulting from such compromise, including, but not limited to, regulatory investigations or actions; litigation; fines and penalties; interruptions
to our commercial operations, clinical trials or other operations; harm to our reputation; loss of revenue or profits; loss of sales and other adverse
consequences.
In the ordinary course of our business, we and our third-party service providers may process proprietary, confidential, and sensitive data,
including personal data (such as health-related data and data related to our clinical trials), intellectual property, and trade secrets (collectively, sensitive
information).
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Cyberattacks, malicious internet-based activity, and online and offline fraud are prevalent and continue to increase. These threats are becoming
increasingly difficult to detect. These threats come from a variety of sources, including traditional computer “hackers,” threat actors, personnel (such as
through theft or misuse), "hacktivists", organized criminal threat actors, sophisticated nation-states, and nation-state-supported actors. Some actors now
engage and are expected to continue to engage in cyberattacks, including without limitation nation-state actors for geopolitical reasons and in conjunction
with military conflicts and defense activities. During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable
to a heightened risk of these attacks, including retaliatory cyberattacks that could materially disrupt our systems and operations, supply chain, and ability to
produce, sell and distribute our products. We and the third parties upon which we rely may be subject to a variety of other evolving threats, including, but
not limited to, social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks),
malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential
stuffing, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or
hardware failures, loss of data or other information technology assets, adware, telecommunications failures, attacks enhanced or facilitated by artificial
intelligence, and other similar threats. In particular, ransomware attacks, including those from organized criminal threat actors, nation-states and nation-
state supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions, delays, or outages in our operations, ability
to provide our products, disruption of clinical trials, loss of data (including data related to clinical trials), loss of income, significant extra expenses to
restore data or systems, reputational loss and the diversion of funds. To alleviate the financial, operational and reputational impact of a ransomware attack,
it may be preferable to make extortion payments, but we may be unwilling or unable to do so (including, for example, if applicable laws prohibit such
payments). Additionally, hybrid and remote work has become more common and has increased risks to our information technology systems and data, as
more of our employees utilize network connections, computers, and devices outside our premises or network, including working at home, while in transit,
and in public locations. Future or past business transactions (such as acquisitions or integrations) could also expose us to additional cybersecurity risks and
vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.
Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to
integrate companies into our information technology environment and security program.
We rely upon third parties and technologies to operate critical business systems to process sensitive information in a variety of contexts,
including, without limitation, third-party providers of cloud-based infrastructure, encryption and authentication technology, employee email, and other
functions. We also rely on third parties to provide certain products, including active pharmaceutical ingredients, to operate our business. Our ability to
monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place.
While we may be entitled to damages if the third parties upon which we rely fail to satisfy their privacy or security-related obligations to us, any award may
be insufficient to cover our damages, or we may be unable to recover such award. In addition, supply-chain attacks have increased in frequency and
severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or our third-party partners’ supply chains have not been
compromised. We may share or receive sensitive information with or from third parties.
While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will
be effective. We take steps designed to detect, mitigate and remediate vulnerabilities in our information security systems (such as our hardware and/or
software, including that of third parties upon which we rely), but we may not be able to detect, mitigate, and remediate all such vulnerabilities including on
a timely basis. Further, we may experience delays in developing and deploying remedial measures and patches designed to address identified
vulnerabilities. Vulnerabilities could be exploited and result in a security incident.
Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful,
or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information or our information
technology systems, or those of the third parties upon whom we rely. A security incident or other interruption could disrupt our ability (and that of third
parties upon whom we rely) to provide our products. We may expend significant resources or modify our business activities (including our clinical trial
activities) to try to protect against security incidents. Certain data privacy and security
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obligations require us to implement and maintain specific security measures, industry-standard or reasonable security measures to protect our information
technology systems and sensitive information.
Applicable data security and public company disclosure obligations may require us to notify relevant stakeholders of certain security incidents,
including affected individuals, customers, regulators and investors. Such disclosures are costly, and the disclosures or the failure to comply with such
requirements could lead to adverse consequences. If we (or a third party upon whom we rely) experience a security incident or are perceived to have
experienced a security incident, we may experience adverse consequences. These consequences may include: government enforcement actions (for
example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive
information (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund
diversions; diversion of management attention; interruptions in our operations (including availability of data); financial loss and other similar harms. For
example, the loss of clinical trial data from completed or ongoing clinical trials for any of our product candidates could result in delays in our regulatory
approval efforts and significantly increase our costs to recover or reproduce the data.
Whether a cybersecurity incident is reportable to our investors may not be straightforward, may take considerable time to determine, and may be
subject to change as the investigation of the incident progresses, including changes that may significantly alter any initial disclosure that we provide.
Moreover, experiencing a material cybersecurity incident and any mandatory disclosures could lead to negative publicity, loss of customer, investor or
partner confidence in the effectiveness of our cybersecurity measures, diversion of management’s attention, governmental investigations, lawsuits, and the
expenditure of significant capital and other resources.
Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our
contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. In addition, our insurance
coverage may not be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices or that such coverage
will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.
In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data
brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or
market position. Sensitive information of us or our customers could also be leaked, disclosed, or revealed as a result of or in connection with our
employee’s, personnel’s, or vendor’s use of generative AI technologies.
Our employee or future employees may engage in misconduct or other improper activities, including violating applicable regulatory standards and
requirements or engaging in insider trading, which could significantly harm our business.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with
the regulations of the FDA and applicable foreign regulators, provide accurate information to the FDA and applicable foreign regulators, comply with
healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or data accurately and/or disclose
unauthorized activities to us. In particular, research and development, commercialization and business arrangements in the healthcare industry are subject
to considerable laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations
restrict, regulate or prohibit a wide range of activities pertaining to clinical trials including the informed consent process, data integrity and conducting the
study in accordance with the investigational plan, and for approved products, pricing, discounting, marketing and promotion, sales commission, customer
incentive programs and other business arrangements. Employee misconduct could also involve the improper use of, including trading on, information
obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify
and deter employee misconduct, and the precautions we take to detect and prevent this activity may be ineffective in controlling unknown or unmanaged
risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or
regulations. Additionally, we are subject to the risk that a person could allege such fraud or other misconduct, even if none occurred. If any such actions are
instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have
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a significant impact on our business, including the imposition of significant fines or other sanctions, possible exclusions from participation in Medicare,
Medicaid and other U.S. federal healthcare programs, contractual damages and reputational harm.
If we or any contract manufacturers and suppliers we engage fail to comply with environmental, health and safety laws and regulations, we could
become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.
We, and any contract manufacturers and suppliers we engage, are subject to numerous federal, state and local environmental, health and safety
laws, regulations and permitting requirements, including those governing laboratory procedures; the generation, handling, use, storage, treatment and
disposal of hazardous and regulated materials and wastes; the emission and discharge of hazardous materials into the ground, air and water; and employee
health and safety. Under certain environmental laws, we could be held responsible for costs relating to any contamination at our current or past facilities
and at third-party facilities. We also could incur significant costs associated with civil or criminal fines and penalties.
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act, or the FCPA, and other worldwide anti-bribery laws.
We are subject to the FCPA, which prohibits U.S. corporations and their representatives from offering, promising, authorizing or making
payments to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business
abroad. The scope of the FCPA includes interactions with certain healthcare professionals in many countries. Other countries have enacted similar anti-
corruption laws and/or regulations. In some countries in which we operate, the pharmaceutical and life sciences industries are exposed to a high risk of
corruption associated with the conduct of clinical trials and other interactions with healthcare professionals and institutions. Any such activities could
expose us to potential liability under the FCPA, which may result in us incurring significant criminal and civil penalties and to potential liability under the
anti-corruption laws and regulations of other jurisdictions in which we operate. In addition, the costs we may incur in defending against an FCPA
investigation could be significant.
Risks Related to Ownership of Our Common Stock
We could be delisted from Nasdaq, which would seriously harm the liquidity of our stock and ability to raise capital.
On June 1, 2022, the Company received a notice from the Nasdaq Stock Market ("Nasdaq") notifying the Company that the closing bid price for
the Company's common stock listed on Nasdaq has been below the minimum $1.00 per share required for continued listing on the Nasdaq Global Select
Market pursuant to Nasdaq Listing Rule 5450(a)(1) (the "Bid Price Requirement").
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided a period of 180 calendar days, or until November 28, 2022,
to regain compliance with the Bid Price Requirement. The Company did not regain compliance with the Bid Price Requirement by the initial compliance
date. On November 29, 2022, however, Nasdaq notified the Company of its eligibility for an additional 180 calendar day period, or until May 29, 2023 (the
"Extended Compliance Date"), to regain compliance with the Bid Price Requirement. Nasdaq’s determination was based on the Company meeting the
continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Nasdaq Capital Market
with the exception of the Bid Price Requirement, and the Company's written notice of its intention to cure the deficiency during the second compliance
period by effecting a reverse stock split, if necessary. Effective November 25, 2022, the Company transferred its listing of the Company's common stock
from the Nasdaq Global Market to the Nasdaq Capital Market, a continuous trading market that operates in substantially the same manner as the Nasdaq
Global Market. The Company’s common stock continues to trade under the symbol “CYCN”.
We effected a 20:1 reverse stock split in May 2023. As a result, we have regained compliance with the Bid Price Requirement. If the Company
does not regain compliance with the Bid Price Requirement in the future, the Company's stock will again be subject to delisting. As a result of amendments
in October 2024 to the NASDAQ
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delisting procedures, NASDAQ now may automatically delist companies which conduct multiple reverse stock splits in any 12-month period.
The Company intends to monitor the closing bid price of its common stock and may, if appropriate, consider available options to regain
compliance with the Bid Price Requirement, including initiating a reverse stock split. However, there can be no assurance that the Company will be able to
maintain compliance with the Bid Price Requirement, would receive sufficient shareholder support for a reverse stock split, or will otherwise be in
compliance with other Nasdaq Listing Rules.
The market price of our common stock may fluctuate widely and you could lose all or part of your investment in our common stock as a result.
The market price for our common stock has fluctuated widely, and may in the future fluctuate widely, depending upon many factors, some of
which are beyond our control, including the following:
•
failure to raise additional capital on a timely basis and the terms on which we raise any capital;
•
a relatively low public float for our shares of common stock, which could cause trades of small blocks of shares to have a significant impact
on the price of our shares of common stock;
•
results and timing of nonclinical studies and clinical studies of our product candidates;
•
the commercial performance of our product candidates, those out-licensed to third parties and the Transferred Assets sold to Tisento, if
approved, as well as the costs associated with such activities;
•
results of clinical studies of our competitors' products;
•
failure to adequately protect our trade secrets;
•
commencement or termination of any strategic partnership or licensing arrangement;
•
regulatory developments with respect to our product candidates or our competitors' products, including any developments, litigation or
public concern about the safety of such products;
•
announcements concerning product development results, including clinical trial results, the introduction of new products or intellectual
property rights of us or others;
•
actual or anticipated fluctuations in our financial condition and our quarterly and annual operating results;
•
deviations in our operating results from any guidance we may provide or the estimates of securities analysts;
•
sufficiency, additions and departures of key personnel;
•
the passage of legislation or other regulatory developments affecting us or our industry;
•
fluctuations in the valuation of companies perceived by investors to be comparable to us;
•
sales of our common stock by us, our insiders or our other shareholders;
•
strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in
business strategy;
•
announcement or expectation of additional financing efforts;
•
publication of research reports by securities analysts about us or our competitors or our industry and speculation regarding our company or
our stock price in the financial or scientific press or in online investor communities;•changes in market conditions in the pharmaceutical and
biotechnology sector;
•
Nasdaq's rules, which impose certain continued listing requirements, including a minimum $1 bid price, such that a failure to meet these
requirements would lead Nasdaq to take further steps to delist our common stock; and
46
•
changes in general market and economic conditions.
In addition, if the market for stocks in our industry or industries related to our industry, or the stock market in general, experiences a loss of
investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, results of operations, financial condition
and prospects. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly
to defend and a distraction to management.
The market price for our common stock is particularly volatile.
The market for our common stock is characterized by significant price volatility when compared to seasoned issuers, and we expect that our
stock price will continue to be more volatile than those of a seasoned issuer. Several factors cause the volatility in our share price. We are a speculative or
“risky” investment due to our short operating history, lack of revenues and the uncertain success (including of regulatory approval) of any of our product
candidates. As a consequence of this risk, more risk-averse investors may, under the fear of losing all or most of their investment in the event of negative
news or lack of progress, be more inclined to sell their shares of our common stock more quickly and at greater discounts than would be the case with the
stock of a seasoned issuer. Plaintiffs have, in the past, initiated securities class action litigation against a company following periods of volatility in the
market price of its securities. We may in the future be the target of such litigation. Securities litigation could result in substantial costs and liabilities and
could divert management’s attention and resources.
We run the risk of inadvertently being deemed an investment company required to register under the Investment Company Act of 1940.
We run the risk of inadvertently being deemed an investment company required to register under the Investment Company Act of 1940 (the
“Investment Company Act”) because a significant portion of our assets consists of investments in companies in which we own less than a majority interest.
The risk varies depending on events beyond our control, such as significant appreciation or depreciation in the market value of certain of our publicly
traded holdings, adverse developments with respect to our ownership of certain of our subsidiaries, transactions involving the sale of certain assets and our
participation in any partnership or other fund established to finance future broadband and real estate projects in which we may engage. If we are deemed to
be an inadvertent investment company, we may seek to rely on a safe harbor under the Investment Company Act that would provide us a one-year grace
period to take steps to avoid being deemed to be an investment company. In order to ensure we avoid being deemed an investment company, we have
taken, and may need to continue to take, steps to reduce the percentage of our assets that constitute investment assets under the Investment Company Act.
These steps have included, among others, selling marketable securities that we might otherwise hold for the long term and deploying our cash in non-
investment assets. We have recently sold marketable securities, including at times at a loss, and we may be forced to sell our investment assets at
unattractive prices or to sell assets that we otherwise believe benefit our business in the future to remain below the requisite threshold. We may also seek to
acquire additional non-investment assets to maintain compliance with the Investment Company Act, and we may need to incur debt, issue additional equity
or enter into other financing arrangements that are not otherwise attractive to our business. Any of these actions could have a material adverse effect on our
results of operations and financial condition. Moreover, we can make no assurance that we would successfully be able to take the necessary steps to avoid
being deemed to be an investment company in accordance with the safe harbor. If we were unsuccessful, then we would have to register as an investment
company, and we would be unable to operate our business in its current form. We would be subject to extensive, restrictive, and potentially adverse
statutory provisions and regulations relating to, among other things, operating methods, management, capital structure, indebtedness, dividends, and
transactions with affiliates. If we were deemed to be an investment company and did not register as an investment company when required to do so, there
would be a risk, among other material adverse consequences, that we could become subject to monetary penalties or injunctive relief, or both, that we
would be unable to enforce contracts with third parties, and/or that third parties could seek to obtain rescission of transactions with us undertaken during
the period in which we were an unregistered investment company.
Uncertainties in the interpretation and application of existing, new and proposed tax laws and regulations could materially affect our tax obligations
and effective tax rate.
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The tax regimes to which we are subject or under which we operate are unsettled and may be subject to significant change. The issuance of
additional guidance related to existing or future tax laws, or changes to tax laws or regulations proposed or implemented by the current or a future U.S.
presidential administration, Congress, or taxing authorities in other jurisdictions, including jurisdictions outside of the United States, could materially affect
our tax obligations and effective tax rate. To the extent that such changes have a negative impact on us, including as a result of related uncertainty, these
changes may adversely impact our business, financial condition, results of operations, and cash flows.
The amount of taxes we pay in different jurisdictions depends on the application of the tax laws of various jurisdictions, including the United
States, to our international business activities, tax rates, new or revised tax laws, or interpretations of tax laws and policies, and our ability to operate our
business in a manner consistent with our corporate structure and intercompany arrangements. The taxing authorities of the jurisdictions in which we operate
may challenge our methodologies for pricing intercompany transactions pursuant to our intercompany arrangements or disagree with our determinations as
to the income and expenses attributable to specific jurisdictions. If such a challenge or disagreement were to occur, and our position was not sustained, we
could be required to pay additional taxes, interest, and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows,
and lower overall profitability of our operations. Our financial statements could fail to reflect adequate reserves to cover such a contingency. Similarly, a
taxing authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a
“permanent establishment” under international tax treaties, and such an assertion, if successful, could increase our expected tax liability in one or more
jurisdictions.
Effective January 1, 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenses for tax
purposes in the year incurred and requires taxpayers to capitalize and subsequently amortize such expenses over five years for research activities conducted
in the United States and over 15 years of research activities conducted outside the United States. Unless the United States Department of the Treasury
issues regulations that narrow the application of this provision to a smaller subset of our research and development expenses or the provision is deferred,
modified, or repealed by Congress, in future years we may experience a material decrease in our cash flows from operations and an offsetting similarly
sized increase in our net deferred tax assets over these amortization periods. The actual impact of this provision will depend on multiple factors, including
the amount of research and development expenses we will incur and whether we conduct our research and development activities inside or outside the
United States and our overall net operating loss position.
Our ability to use net operating loss carryforwards and certain other tax attributes to offset future taxable income and taxes may be subject to
limitations.
Under current law, our federal net operating losses ("NOLs") generated in tax years beginning after December 31, 2017, may be carried forward
indefinitely, but the deductibility of such federal NOLs is limited to 80% of taxable income. As of December 31, 2024, we had federal NOLs of $195
million. It is uncertain if and to what extent various states will conform to federal tax laws. In addition, under Sections 382 and 383 of the Internal Revenue
Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a
greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and
other pre-change U.S. tax attributes (such as research tax credits) to offset its post-change income or taxes may be limited. It is possible that we have
experienced an ownership change in the past. In addition, we may experience ownership changes in the future as a result of subsequent shifts in our stock
ownership, some of which may be outside of our control, as well as the issuance of additional securities if we are successful in raising equity capital.
As a result, our federal NOL carryforwards may be subject to a percentage limitation if used to offset income in tax years following an
ownership change. In addition, it is possible that we have in the past undergone, and in the future may undergo, additional ownership changes that could
limit our ability to use all of our pre-change NOL carryforwards and other pre-change tax attributes (such as research tax credits) to offset our post-change
income or taxes. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. In addition, at the state level, there
may be periods during which the use of NOL carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes
owed. As a result, we may be unable to use all or a
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material portion of our NOL carryforwards and other tax attributes, which would harm our future operating results by effectively increasing our future tax
obligations.
We maintain our cash at financial institutions, often in balances that exceed federally insured limits.
We maintain the majority of our cash and cash equivalents in accounts at banking institutions in the United States that we believe are of high
quality. Cash held in these accounts often exceeds the FDIC insurance limits. If such banking institutions were to fail, we could lose all or a portion of
amounts held in excess of such insurance limitations. In the event of failure of any of the financial institutions where we maintain our cash and cash
equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in
accessing these funds could adversely affect our business and financial position.
If securities or industry analysts fail to initiate or maintain coverage of our stock, publish a negative report or change their recommendations regarding
our stock adversely, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us, our
business, our market or our competitors. Currently, no industry analysts cover our stock. If securities or industry analysts fail to initiate coverage of our
stock, the lack of exposure to the market could cause our stock price or trading volume to decline. If any of the analysts who cover us or may cover us in
the future publish a negative report or change their recommendation regarding our stock adversely, or provide more favorable relative recommendations
about our competitors, our stock price would likely decline. If any analyst who covers us or may cover us in the future were to cease coverage of our
company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading
volume to decline.
We do not expect to pay any cash dividends for the foreseeable future.
We have never paid cash dividends and we do not anticipate that we will pay any cash dividends to holders of our common stock in the
foreseeable future. Instead, we plan to retain any earnings to maintain and expand our operations. In addition, any future debt financing arrangement may
contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. Accordingly, investors must rely on sales
of their common stock after price appreciation, which may never occur, as the only way to realize any return on their investment. As a result, investors
seeking cash dividends should not purchase our common stock.
We have anti-takeover provisions in our articles of organization and bylaws and are subject to provisions of Massachusetts law that may frustrate any
attempt to remove or replace our current board of directors or to effect a change of control or other business combination involving our company.
Our restated articles of organization and bylaws and certain provisions of Massachusetts law may discourage certain types of transactions
involving an actual or potential change of control of our company that might be beneficial to us or our security holders. For example, our bylaws grant our
directors the right to adjourn any meetings of shareholders. Our board of directors also may issue shares of any class or series of preferred stock in the
future without shareholder approval and upon such terms as our board of directors may determine. The rights of the holders of our common stock will be
subject to, and may be harmed by, the rights of the holders of any class or series of preferred stock that may be issued in the future. Massachusetts state law
also prohibits us from engaging in specified business combinations unless the combination is approved or consummated in a prescribed manner. These
provisions, alone or together, could delay hostile takeovers and changes in control of our company or changes in our management.
Our articles of organization designate the state and federal courts located within the Commonwealth of Massachusetts as the sole and exclusive forum
for certain types of actions and proceedings that may be initiated by our shareholders, which could discourage lawsuits against us and our directors
and officers.
Our restated articles of organization designate the state and federal courts located within the Commonwealth of Massachusetts as the sole and exclusive
forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of a fiduciary duty owed by any of our directors
or officers to us or our shareholders,
49
creditors or other constituents, any action asserting a claim arising pursuant to any provision of the Massachusetts Business Corporation Act, or the MBCA,
or any action asserting a claim governed by the internal affairs doctrine, in all cases subject to the court's having personal jurisdiction over the
indispensable parties named as defendants. In additional, our articles of organization provide that unless our board of directors consents in writing to the
selection of an alternative forum, the U.S. federal district courts shall be the exclusive forum for the resolutions of any complaint asserting a cause of action
arising under the U.S. federal securities laws. This exclusive forum provision may limit the ability of our shareholders to bring a claim in a judicial forum
that such shareholders find favorable for disputes with us or our directors or officers, which may discourage such lawsuits against the company and our
directors and officers. Alternatively, if a court outside of Massachusetts were to find this exclusive forum provision inapplicable to, or unenforceable in
respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such
matters in other jurisdictions, which could harm our business, prospects, financial condition and results of operations.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
Risk Management and Strategy
We have implemented and maintain various information security processes designed to identify, assess and manage material risks from
cybersecurity threats to our critical computer networks, third party hosted services, communications systems, hardware and software, and our critical data,
including intellectual property, confidential information that is proprietary, strategic or competitive in nature, and data related to patients and clinical trials
(“Information Systems and Data”).
Our officers and our IT vendors help identify, assess and manage our cybersecurity threats and risks. We manage, identify and assess risks from
cybersecurity threats by monitoring and evaluating our threat environment and risk profile using various methods including, for example: through the use
of automated tools, including but not limited to tools for monitoring, geolocation, remote wiping, threat detection, intrusion detection and prevention
(including through the use of machine learning, a form of artificial intelligence), patch management, distributed denial of service (DDoS) protection and
forensics; conducting (directly or through third parties) regular audits and threat assessments for internal and external threats; subscribing to reports and
services that identify cybersecurity threats; analyzing reports of threats and actors; conducting vulnerability assessments to identify vulnerabilities;
evaluating our and our industry’s risk profile; conducting tabletop incident response exercises; and evaluating threats reported to us.
Depending on the environment, we implement and maintain various technical, physical, and organizational measures, processes, standards and
policies designed to manage and mitigate material risks from cybersecurity threats to our Information Systems and Data, including, for example: incident
response plans and procedures, disaster recovery/business continuity plans, risk assessments, implementation of security standards and certifications,
encryption of data, network security controls, data segregation, access controls, physical security, asset management, tracking and disposal, systems
monitoring, vendor risk management program, employee training and penetration testing.
Our assessment and management of material risks from cybersecurity threats are integrated into our overall risk management processes. For
example, cybersecurity risk is addressed as a component of our enterprise risk management program, and members of our management team and IT
consultants work together to prioritize our risk management processes, mitigate cybersecurity threats that are more likely to lead to a material impact to our
business, and report regularly to our board of directors on cybersecurity matters.
We use third-party service providers to assist us from time to time to identify, assess, and manage material risks from cybersecurity threats,
including for example managed cybersecurity service providers, threat intelligence service providers, dark web monitoring services, and other
cybersecurity software providers.
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We use third-party service providers to perform a variety of functions throughout our business, including but not limited to application
providers, hosting companies, contract manufacturing organizations and contract research organizations. We have a vendor management program to
oversee, identify and manage cybersecurity risks associated with our use of these providers. The program includes a risk assessment for vendors that may
include, depending on the vendor and nature of services being performed, security questionnaires, review of the vendor's written security program, review
of security assessments, audits and reports, vulnerability scans related to the vendor, security assessment calls with the vendor's security personnel, and the
imposition of certain contractual obligations on the vendor, among other elements, in accordance with the processes outlined in our internal vendor
selection, management, and oversight process policy and other internal guidelines. More specifically, the level of assessment may depend on the following:
the nature of the services provided and the data the vendors may collect, retain, and utilize, the sensitivity of the Information Systems and Data at issue, and
the identity of the provider.
For a description of the risks from cybersecurity threats that may materially affect us and how they may do so, see our risk factors under Part 1.
Item 1A. Risk Factors in this Annual Report on Form 10-K, including the risk factor captioned “If our information technology systems or data, or those of
third parties upon which we rely, are or were compromised, we could experience adverse impacts resulting from such compromise, including, but not
limited to, regulatory investigations or actions; litigation; fines and penalties; interruptions to our commercial operations, clinical trials or other operations;
harm to our reputation; loss of revenue or profits; loss of sales and other adverse consequences.”
Governance
Our board of directors addresses our cybersecurity risk management as part of its general oversight function. Commencing in 2024, our Audit
Committee, on behalf of the board of directors, provides oversight of our cybersecurity risk management program.
Our cybersecurity risk assessment and management processes are implemented and maintained by various members of our management team
and IT consultants, which includes individuals who have a diverse combination of relevant expertise, experience, education and training. Our team includes
individuals with relevant experience in enterprise risk management and disclosure controls and procedures. Additionally, certain members of our team have
experience managing cybersecurity programs and are specifically assigned cybersecurity oversight.
Certain members of our management team are responsible for hiring appropriate personnel, helping to integrate cybersecurity risk considerations
into our overall risk management strategy, communicating key priorities to relevant personnel, approving budgets, helping prepare for cybersecurity
incidents, approving cybersecurity processes, and reviewing security assessments and other security-related reports.
Our cybersecurity incident response processes are designed to escalate certain cybersecurity incidents to members of management. Our
cybersecurity incident management team, and other individuals as needed, work to help us mitigate and remediate cybersecurity incidents of which we are
notified. In addition, our incident response processes include a procedure for reporting certain cybersecurity incidents to the board of directors.
The board of directors receives regular reports from management concerning our cybersecurity risk management program. The board also
receives various summaries and/or presentations related to cybersecurity threats, risks and mitigation.
Item 2. Properties
In April 2021 we completed our exit from our prior laboratory and office facilities in Cambridge Massachusetts and moved to an operating
model under which we outsource our research and development laboratory work, and we are currently leasing office space on an “as-needed” basis.
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Item 3. Legal Proceedings
We are not a party to any material legal proceedings at this time. From time to time, we may be subject to various legal proceedings and claims,
which may have a material adverse effect on our financial position or results of operations.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information for Common Stock
Our common stock is listed on the Nasdaq Capital Market under the symbol “CYCN.”
Holders of Record
As of February 28, 2025, we had 51 holders of record of our common stock, which excludes stockholders whose shares were held in nominee or
street name by brokers. The actual number of common stockholders is greater than the number of record holders, and includes stockholders who are
beneficial owners, but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include
stockholders whose shares may be held in trust by other entities.
Dividend Policy
We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings,
if any, to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future. Any future
determination to pay dividends will be made at the discretion of our board of directors and will depend on various factors, including applicable laws, our
results of operations, financial condition, future prospects and any other factors deemed relevant by our board of directors.
Unregistered Sales of Equity Securities
None.
Purchase of Equity Securities by the Issuer and Affiliated Parties
None.
Item 6. Selected Financial Data.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required
under this item.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial
statements and related notes and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this
Annual Report on Form 10-K.
Forward-Looking Information
The following discussion of our financial condition and results of operations should be read in conjunction with the audited consolidated
financial statements and the corresponding notes included in this Annual Report on Form 10‑K. This discussion contains forward‑looking statements that
involve significant risks and uncertainties. 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.
Overview
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. Dr. 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; Dr. Graul is the only current employee to date. Our goal is to hire additional C-suite executives later this
year.
Financial Overview
Research and Development Expense. Research and development expenses are incurred in connection with the discovery and development of our
product candidates. These expenses consist primarily of the following costs: compensation, benefits and other employee-related expenses, research and
development-related facilities, third-party contracts relating to manufacturing, nonclinical studies, clinical trial activities. All research and development
expenses are charged to operations as incurred.
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.
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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. 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 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 year ended December 31, 2024 and 2023. The product
pipeline expenses related primarily to external costs associated with nonclinical studies and clinical trial costs.
Year Ended
December 31,
2024
2023
(in thousands)
Product pipeline external costs
$
— $
29
Personnel and related internal costs
103
581
Facilities and other
183
905
Total research and development expenses
$
286 $
1,515
Securing regulatory approvals for new drugs is a lengthy and costly process. Any failure by us or our partners to obtain, or any delay in
obtaining, regulatory approvals would materially adversely affect our product candidate development efforts and our business overall.
Given the inherent uncertainties of pharmaceutical product development, we cannot estimate with any degree of certainty how our programs will
evolve, and therefore the amount of time or money that would be required to obtain regulatory approval to market them. As a result of these uncertainties
surrounding the timing and outcome of any approvals, we are currently unable to estimate precisely when, if ever, our discovery and development
candidates will be approved.
55
The successful development of any current or potential future product candidates is highly uncertain and subject to a number of risks. Please
refer to Item 1A, Risk Factors, in this Annual Report on Form 10-K.
We are unable to determine the duration and costs to complete current or future nonclinical and clinical stages of any current or potential future
product candidates, including as licensed to third parties, or when, or to what extent, we may generate revenues from the commercialization and sale of any
current or potential future product candidates. Development timelines, probability of success and development costs vary widely. We anticipate that we
will make determinations as to which additional programs to pursue and how much funding to direct to each program on an ongoing basis in response to
the data from the studies of each product candidate, the competitive landscape and ongoing assessments of such product candidate’s commercial potential.
General and Administrative Expense. 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 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. We base our estimates on our 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 our estimates under different assumptions or conditions. Changes in estimates are reflected in
reported results in the period in which they become known.
We believe that our application of accounting policies requires significant judgments and estimates on the part of management and is the most
critical to aid in fully understanding and evaluating our reported financial results. Our significant accounting policies are more fully described in Note 2,
Summary of Significant Accounting Policies, of the consolidated financial statements elsewhere in this Annual Report on Form 10-K.
All research and development expenses are expensed as incurred. We defer and capitalize nonrefundable advance payments we make for
research and development activities until the related goods are received or the related services are performed. See Note 2, Summary of Significant
Accounting Policies, of the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
Results of Operations
The revenue and expenses reflected in the consolidated financial statements may not be indicative of revenue and expenses that will be incurred
by us in the future. The following discussion summarizes the key factors we believe are necessary for an understanding of our consolidated financial
statements.
Revenues and Expenses
56
Year Ended
December 31,
Change
2024
2023
$
%
(dollars in thousands)
Revenues:
Revenue from license agreement
$
1,750 $
— $
1,750
100 %
Option to license revenue
250
—
250
100 %
Total revenues
2,000
—
2,000
100 %
Cost and expenses:
Research and development
286
1,515
(1,229 )
(81 )%
General and administrative
5,342
8,132
(2,790 )
(34 )%
Impairment loss
—
3,304
(3,304 )
(100 )%
Total cost and expenses
5,628
12,951
(7,323 )
(57 )%
Loss from operations
(3,628 )
(12,951 )
9,323
(72 )%
Other income, net
Interest income
208
358
(150 )
(42 )%
Gain from settlement of account payable
363
—
363
100 %
Total other income, net
571
358
213
59 %
Net loss from continuing operations
(3,057 )
(12,593 )
9,536
(76 )%
Discontinued operations:
Gain from discontinued operations
—
7,330
(7,330 )
(100 )%
Net loss
$
(3,057 ) $
(5,263 ) $
2,206
(42 )%
Revenues. 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 $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 $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 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.
57
Interest and other income, net. 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
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. The 2020 Shelf expired in July 2023. 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. There were no material fees or commissions related to
the transaction. Such Series A Convertible Preferred Stock is convertible into shares of our common stock on a one-to-one basis. Our shareholders
approved such convertibility on July 19, 2023.
On July 28, 2023, we closed the transactions contemplated by the Asset Purchase Agreement receiving proceeds of $8.0 million as cash
consideration, approximately $2.4 million as reimbursement for certain operating expenses related to zagociguat and CY3018 programs for the period
between signing and closing of the transaction, and 10% of all of Tisento Parent’s outstanding equity securities.
Our ability to continue to fund our operations and meet capital needs will depend on our ability to generate cash from operations and access to
capital markets and other sources of capital, as further described below. We anticipate that our principal uses of cash in the future will be primarily to fund
our operations, working capital needs, capital expenditures and other general corporate purposes.
On December 31, 2024, we had approximately $3.2 million of unrestricted cash and cash equivalents. Our cash equivalents include amounts held
in U.S. government money market funds. We invest cash in excess of immediate requirements in accordance with our investment policy, which requires all
investments held by us to be at least “AAA” rated or equivalent, with a remaining final maturity when purchased of less than twelve months, so as to
primarily achieve liquidity and capital preservation.
Going Concern
We evaluated whether there are conditions and events, considered in the aggregate, which raise substantial doubt about our ability to continue as
a going concern within one year after the date that these consolidated financial statements are issued. This evaluation initially does not take into
consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued.
When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of our plans sufficiently alleviates substantial
doubt about our ability to continue as a going concern. 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
58
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.
We have incurred recurring losses since our inception, including a net loss of $3.1 million for the year ended December 31, 2024. In addition, as
of December 31, 2024, we had an accumulated deficit of $267.5 million. 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.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described
above.
Reverse Stock Split
On May 15, 2023, we filed Articles of Amendment to our Restated Articles of Organization with the Secretary of Commonwealth of
Massachusetts to effect a 1-for-20 reverse stock split of our issued and outstanding shares of common stock. The reverse stock split was reflected on the
Nasdaq Capital Market beginning with the opening of trading on May 16, 2023. All share amounts and per share amounts disclosed in this Annual Report
on Form 10-K have been adjusted retroactively to reflect the reverse stock split for all periods presented.
Cash Flows
The following is a summary of cash flows for the years ended December 31, 2024 and 2023:
Year Ended
December 31,
Change
2024
2023
$
%
(dollars in thousands)
Net cash used in operating activities
$
(4,333 ) $
(21,245 ) $
16,912
(80 )%
Net cash provided by investing activities
$
— $
10,402 $
(10,402 )
—
Net cash provided by financing activities
$
— $
5,024 $
(5,024 )
—
Cash Flows from Operating Activities
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.
59
Cash Flows from Investing Activities
Net cash provided by investing activities for the year ended December 31, 2023 of $10.4 million was due to cash proceeds received from the
disposal of discontinued operations of approximately $10.4 million. There was no investing activity incurred during the year ended December 31, 2024.
Cash Flows from Financing Activities
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 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. 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. Our expenses will fluctuate, and our future funding requirements will depend on, and
could increase or decrease significantly as a result of many factors, including the:
•
scope, progress, results and costs of researching and developing our current and any potential future product candidates, and any preclinical
studies and clinical trials we may conduct;
•
costs, timing and outcome of regulatory review of any current and any potential future product candidates;
•
costs of future activities, including medical affairs, manufacturing and distribution, of any current or potential future product candidates for
which we receive marketing approval;
•
cost and timing of necessary actions to support our strategic objectives;
•
costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending
intellectual property-related claims; and
•
timing, receipt and amount of sales of, or milestone payments related to or royalties on, our current or potential future product candidates, if
any.
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 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,
60
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.
Contractual Commitments and Obligations
Tax-related Obligations
We exclude assets, liabilities or obligations pertaining to uncertain tax positions from our contractual commitments and obligations as we cannot
make a reliable estimate of the period of cash settlement with the respective taxing authorities. As of December 31, 2024, we had no uncertain tax
positions.
Separation Benefits
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
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or
special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements (as that term is defined in Item
303(a)(4)(ii) of Regulation S-K) or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit
risk that could arise if we had engaged in those types of relationships. We enter into guarantees in the ordinary course of business related to the guarantee
of our own performance.
New Accounting Pronouncements
For a discussion of new accounting pronouncements see Note 2, Summary of Significant Accounting Policies, of the consolidated financial
statements appearing elsewhere in this Annual Report on Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required
under this item.
Item 8. Financial Statements and Supplementary Data.
The information required by this Item 8 is set forth in our financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are
designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our
management,
61
including our principal executive and our principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
With respect to the year ended December 31, 2024, under the supervision and with the participation of our management, we conducted an
evaluation of the effectiveness of the design and operations of our disclosure controls and procedures. Based upon this evaluation, our President and Chief
Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2024 to provide reasonable assurance that
the information required to be disclosed by us in this Annual Report was (a) reported within the time periods specified by SEC rules and regulations and (b)
communicated to our management, including our President and Chief Financial Officer, to allow timely decisions regarding any required disclosure.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of
consolidated financial statements for external purposes in accordance with GAAP. Internal control over financial reporting is a process designed by, or
under the supervision of, our President and Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and procedures that:
•
Pertain to the maintenance of records that accurately and fairly reflect in reasonable detail the transactions and dispositions of the assets of
our company;
•
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of
our management and directors; and
•
Provide reasonable assurances regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that
could have a material adverse effect on our financial statements.
Management assessed our internal control over financial reporting as of December 31, 2024, the end of our fiscal year. Management based its
assessment on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework). Management’s assessment included evaluation of elements such as the design and operating effectiveness of key financial
reporting controls, process documentation, accounting policies, and our overall control environment.
Based on this assessment, management has concluded that our internal controls over financial reporting were effective as of December 31, 2024
and provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes
in accordance with GAAP. We reviewed the results of management’s assessment with the Audit Committee of our Board of Directors.
Internal control over financial reporting has inherent limitations. Internal control over financial reporting is a process that involves human
diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also
can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements will not be
prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial
reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Attestation Report of the Registered Public Accounting Firm
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over
financial reporting. Our report was not subject to attestation by our independent
62
registered public accounting firm pursuant to the rules of the Securities and Exchange Commission for “emerging growth companies” that permit us to
provide only management’s report in this report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that
occurred during the fiscal year ended December 31, 2024 which have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
Inherent Limitations on Effectiveness of Internal Controls
In designing and evaluating the disclosure controls and procedures, management does not expect that our internal control over financial reporting
will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. The design of any disclosure controls and procedures also is based in part upon
certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all
potential future conditions. Our management, including our President and Chief Financial Officer, believes that our disclosure controls and procedures and
internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable
assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will
prevent all errors and all fraud.
Item 9B. Other Information.
(a) None
(b) Director and Officer Trading Arrangements
None of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or adopted or terminated a non-Rule 10b5-1 trading
arrangement (as defined in Item 408(c) of Regulation S-K) during the fourth quarter ended December 31, 2024.
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.
Not applicable.
63
PART III
We intend to file a definitive Proxy Statement for our 2025 Annual Meeting of Stockholders, or the Proxy Statement, with the SEC, pursuant to
Regulation 14A, not later than 120 days after the end of our fiscal year. Accordingly, certain information required by Part III has been omitted under
General Instruction G(3) to Form 10-K. Only those sections of the 2025 Proxy Statement that specifically address the items set forth herein are
incorporated by reference.
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this Item 10 will be included in our Proxy Statement under the captions “Information Regarding the Board of
Directors and Corporate Governance,” “Election of Directors,” “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance” and
is incorporated herein by reference.
Item 11. Executive Compensation.
The information required by this Item 11 will be included in our Proxy Statement under the captions “Executive Compensation” and “Director
Compensation” and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this Item 12 will be included in our Proxy Statement under the captions “Security Ownership of Certain Beneficial
Owners and Management” and “Securities Authorized for Issuance under Equity Compensation Plans” and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item 13 will be included in our Proxy Statement under the captions “Transactions with Related Persons” and
“Independence of the Board of Directors” and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services.
The information required by this Item 14 will be included in our Proxy Statement under the caption “Ratification of Selection of Independent
Registered Public Accounting Firm” and is incorporated herein by reference.
64
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)(1) Financial Statements
See the Index to Consolidated Financial Statements in the Financial Statements Section beginning on page F-1 of this Annual Report on Form
10-K.
(a)(2) Financial Statement Schedules
All financial statement schedules have been omitted as they are not required, not applicable, or the required information is included in the
financial statements or notes to the financial statements.
(a)(3) Exhibits
EXHIBIT INDEX
Exhibit No.
Description
3.1
Restated Articles of Organization of Cyclerion Therapeutics, Inc. (incorporated by reference to Exhibit 4.1 to Registration Statement on
Form S-8 filed on March 29, 2019) (File No. 333-230615))
3.2
Articles of Amendment to Amended and Restated Articles of Incorporation dated May 15, 2023 (incorporated by reference to Exhibit
3.1 to Current Report on Form 8-K filed on May 15, 2023) (File No.001-38787)
3.3
Articles of Amendment to Amended and Restated Articles of Incorporation dated May 19, 2023 (incorporated by reference to Exhibit
3.1 to Current Report on Form 8-K filed on May 25, 2023) (File No. 38787)
3.4
Amended and Restated Bylaws of Cyclerion Therapeutics, Inc. (incorporated by reference to Exhibit 4.2 to Registration Statement on
Form S-8 filed on March 29, 2019) (File No. 333-230615))
4.1
Description of Securities Registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended
10.1
Intellectual Property License Agreement, dated April 1, 2019, by and between Ironwood Pharmaceuticals, Inc. and Cyclerion
Therapeutics, Inc. (incorporated by reference to Exhibit 10.6 to Current Report on Form 8-K filed on April 2, 2019 (File No. 001-
38787))
10.2
Form of Indemnification Agreement between Cyclerion Therapeutics, Inc. and individual directors and officers (incorporated by
reference to Exhibit 10.7 to Form 10 filed on January 28, 2019 (File No. 001-38787))
10.3
Cyclerion Therapeutics, Inc. 2019 Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.3 to Registration Statement on
Form S-8 filed on March 29, 2019 (File No. 333-230615))
10.4
Cyclerion Therapeutics, Inc. 2019 Equity Incentive Plan (incorporated by reference to Exhibit 4.4 to Registration Statement on Form S-
8 filed on March 29, 2019 (File No. 333-230615))
10.5
Form of Stock Option Agreement under the Cyclerion Therapeutics, Inc. 2019 Equity Incentive Plan (incorporated by reference to
Exhibit 10.10 to Form 10 filed on March 4, 2019 (File No. 001-38787))
10.6
Form of Non-Employee Director Restricted Stock Agreement under the Cyclerion Therapeutics, Inc. 2019 Equity Incentive Plan
(incorporated by reference to Exhibit 10.11 to Form 10 filed on March 4, 2019 (File No. 001-38787))
+
+
+
+
+
65
10.7
Form of Restricted Stock Unit Agreement under the Cyclerion Therapeutics, Inc. 2019 Equity Incentive Plan (incorporated by reference
to Exhibit 10.12 to Form 10 filed on March 4, 2019 (File No. 001-38787))
10.8
Cyclerion Therapeutics, Inc. Amended and Restated 2010 Employee, Director and Consultant Equity Incentive Plan and forms of
agreement thereunder (incorporated by reference to Exhibit 4.5 to Registration Statement on Form S-8 filed on March 29, 2019 (File
No. 333-230615))
10.9
License Agreement, dated as of June 3, 2021, by and between Cyclerion Therapeutics, Inc. and Akebia Therapeutics, Inc (incorporated
by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q filed on July 29, 2021 (File No. 001-38787))
10.10
Amendment #1 to License Agreement by and between the Company and Akebia Therapeutics, Inc. dated December 13, 2024
(incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on December 17, 2024)
10.11
Common Stock Purchase Agreement, dated as of June 3, 2021, by and between Cyclerion Therapeutics, Inc. and the Investors named
therein (incorporated by reference to Exhibit 10.1 to Registration Statement on Form S-3 filed on June 16, 2021 (File No. 333-257145)).
10.13
Amendment to Original Offer Letter to Regina Graul (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed
on August 7, 2024 (File No. 001-38787))
19
Insider Trading Prevention Policy
21.1
List of Subsidiaries
23.1
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
31.1
Certificate of Chief Executive Officer (Principal Executive Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certificate of Chief Financial Officer (Principal Financial Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certificate of Chief Executive Officer (Principal Executive Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
32.2
Certificate of Chief Financial Officer (Principal Executive Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
97.1
Policy for the Recovery of Erroneously Awarded Compensation adopted November 30, 2023 (incorporated by reference to Exhibit 97.1
to Annual Report on Form 10-K filed on March 5, 2024 (File No. 001-38787))
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
104
Cover Page Interactive Data File
+ Indicates a management contract or compensatory plan.
* Certain portions of this exhibit (indicated by asterisks) have been omitted because they are not material and are the type that the Registrant treats as
private or confidential.
Item 16. Form 10-K Summary.
Not applicable.
+
+
*
*
+
66
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrants have duly caused this report to be
signed on their behalf by the undersigned, thereunto duly authorized, on March 4, 2025.
CYCLERION THERAPEUTICS, INC.
By:
/s/ Regina Graul
Regina Graul
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Regina Graul and
Rhonda Chicko, jointly and severally, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him
or her and in his or her name, place and stead, in any and all capacities, to sign this Annual Report on Form 10-K of Cyclerion Therapeutics, Inc.,
and any or all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises hereby ratifying and confirming all that said attorneys-in-fact and agents, or his, her or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 4, 2025.
Signature
Title
/s/ Regina Graul
Regina Graul
President, Chief Executive Officer (Principal Executive Officer) and Director
/s/ Rhonda Chicko
Rhonda Chicko
Chief Financial Officer (Principal Financial and Accounting Officer)
/s/ Errol De Souza
Errol De Souza
Director
/s/ Peter Hecht
Peter Hecht
Director
/s/ Michael Higgins
Michael Higgins
Director
/s/ Steven Hyman
Steven Hyman
Director
/s/ Dina Katabi
Dina Katabi
Director
F-1
Index to Consolidated Financial Statements of Cyclerion Therapeutics, Inc.
Page
Report of Independent Registered Public Accounting Firm - PCAOB ID:42
F-2
Consolidated Balance Sheets as of December 31, 2024 and 2023
F-3
Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2024 and 2023
F-4
Consolidated Statement of Stockholders’ Equity for the Years Ended December 31, 2024 and 2023
F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023
F-6
Notes to the Consolidated Financial Statements
F-7
F-2
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Cyclerion Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cyclerion Therapeutics, Inc. (the Company) as of December 31, 2024 and 2023, the
related consolidated statements of operations and comprehensive loss, stockholders' equity and cash flows for each of the two years in the period ended
December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations
and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
The Company's Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in
Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations, has limited financial resources, and has stated
that substantial doubt exists about the Company’s ability to continue as a going concern. Management's evaluation of the events and conditions and
management’s plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 2018.
/s/ Ernst & Young LLP
Boston, Massachusetts
March 4, 2025
F-3
Cyclerion Therapeutics, Inc.
Consolidated Balance Sheets
(In thousands except share and per share data)
December 31,
2024
December 31,
2023
ASSETS
Current assets:
Cash and cash equivalents
$
3,232 $
7,571
Accounts receivable
556
—
Prepaid expenses
421
442
Other current assets
16
11
Total current assets
4,225
8,024
Other investment
5,350
5,350
Total assets
$
9,575 $
13,374
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
390 $
1,198
Accrued research and development costs
52
90
Accrued expenses and other current liabilities
283
798
Total current liabilities
725
2,086
Commitments and contingencies (Note 8)
—
—
Stockholders' equity
Preferred stock, no par value, 100,000,000 shares authorized and 351,037 shares of Series A
convertible preferred stock issued and outstanding at December 31, 2024 and 2023
—
—
Common stock, no par value, 400,000,000 shares authorized at December 31, 2024 and 2023;
2,710,096 and 2,645,096 shares issued at December 31, 2024 and 2023, respectively; 2,545,922 and
2,474,159 shares outstanding at December 31, 2024 and 2023, respectively
—
—
Paid-in capital
276,342
275,717
Accumulated deficit
(267,492 )
(264,417 )
Accumulated other comprehensive loss
—
(12 )
Total stockholders' equity
8,850
11,288
Total liabilities and stockholders' equity
$
9,575 $
13,374
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Cyclerion Therapeutics, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(In thousands except per share data)
Year Ended
December 31,
2024
2023
Revenues:
Revenue from license agreement
$
1,750 $
—
Option to license revenue
250
—
Total revenues
2,000
—
Cost and expenses:
Research and development
286
1,515
General and administrative
5,342
8,132
Impairment loss
—
3,304
Total cost and expenses
5,628
12,951
Loss from operations
(3,628 )
(12,951 )
Other income, net
Interest income
208
358
Gain from settlement of account payable
363
—
Total other income, net
571
358
Net loss from continuing operations
(3,057 )
(12,593 )
Discontinued operations:
Gain from discontinued operations
—
7,330
Net loss
$
(3,057 ) $
(5,263 )
Net income (loss) per share - basic and diluted
Net loss per share from continuing operations
$
(1.21 ) $
(5.39 )
Net income per share from discontinued operations
—
3.14
Net loss per share
$
(1.21 ) $
(2.25 )
Weighted average shares used in calculating:
Basic and diluted shares
2,518
2,338
Other comprehensive loss:
Net loss
$
(3,057 ) $
(5,263 )
Other comprehensive income (loss):
Foreign currency translation adjustment (loss) gain
(6 )
8
Comprehensive loss
$
(3,063 ) $
(5,255 )
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Cyclerion Therapeutics, Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands except share data)
Common Stock
Preferred Stock
Paid-in
Accumulated
Accumulated
other
comprehensiv
e
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
—
—
—
—
—
(5,263 )
—
(5,263 )
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
44,227
—
—
—
24
—
—
24
Vesting of restricted stock awards
29,063
—
—
—
—
—
—
—
Share-based compensation expense related to issuance of
stock options and RSUs to employees and employee
stock purchase plan
—
—
—
—
1,042
—
—
1,042
Share‑based compensation expense related to issuance of
stock options to non-employees
—
—
—
—
25
—
—
25
Foreign currency translation adjustment
—
—
—
—
—
—
8
8
Fractional shares issuance
(67 )
—
—
—
—
—
—
—
Balance at December 31, 2023
2,474,159 $
—
351,037 $
— $
275,717 $
(264,417 ) $
(12 ) $
11,288
Net loss
—
—
—
—
—
(3,057 )
—
(3,057 )
Vesting of restricted stock awards
71,763
—
—
—
—
—
—
—
Share-based compensation expense related to issuance of
stock options and restricted stock awards
—
—
—
—
625
—
—
625
Foreign currency translation adjustment
—
—
—
—
—
—
(6 )
(6 )
Release of foreign currency translation adjustment upon
liquidation of a subsidiary
—
—
—
—
—
(18 )
18
—
Balance at December 31, 2024
2,545,922 $
—
351,037 $
— $
276,342 $
(267,492 ) $
— $
8,850
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Cyclerion Therapeutics, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
2024
2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
(3,057 ) $
(5,263 )
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on disposal of discontinued operations
—
(15,752 )
Gain from settlement of account payable
(363 )
—
Impairment loss
—
3,304
Share-based compensation expense
625
1,067
Changes in operating assets and liabilities:
Accounts receivable
(556 )
96
Prepaid expenses
21
363
Other current assets
(5 )
160
Operating lease assets
—
108
Other assets
—
213
Accounts payable
(445 )
(1,772 )
Accrued research and development costs
(38 )
(2,185 )
Accrued expenses and other current liabilities
(515 )
(1,584 )
Net cash used in operating activities
(4,333 )
(21,245 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from disposal of discontinued operations
—
10,402
Net cash provided by investing activities
—
10,402
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock purchase agreement
—
5,000
Proceeds from exercises of stock options and ESPP
—
24
Net cash provided by financing activities
—
5,024
Effect of exchange rate changes on cash and cash equivalents
(6 )
8
Net decrease in cash and cash equivalents
(4,339 )
(5,811 )
Cash and cash equivalents, beginning of period
7,571
13,382
Cash and cash equivalents, end of period
$
3,232 $
7,571
Supplemental cash flow disclosure:
Non-cash gain on disposal of discontinued operations
$
— $
5,350
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Cyclerion Therapeutics, Inc.
Notes to the Consolidated Financial Statements
1. Nature of Business
Nature of Operations
Cyclerion Therapeutics, Inc. (“Cyclerion”, the “Company” or “we”) became an independent public company on April 1, 2019 after Ironwood
Pharmaceuticals, Inc. completed a tax-free spin-off of their sGC business. Cyclerion is focused on building a new pipeline with therapeutics to treat certain
neuropsychiatric diseases. Cyclerion has prioritized an individualized therapy for treatment resistant depression (“TRD”) as its foundational product
candidate and has 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, the Company believes that this product is well
suited to be its foundation moving forward for Cyclerion. The Company is currently developing an integrated development and commercial strategy in
TRD. Cyclerion has one employee as of December 31, 2024.
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 Company’s strategy changed and Cyclerion's sGC assets have
either been sold, out-licensed or has plans to be out-licensed to a third party. The Company’s prior strategy to conduct research and development on sGC
stimulators has been discontinued and Cyclerion does not intend to internally pursue research and development or commercialization with any sGC asset.
The Company is leveraging its legacy sGC stimulator assets to generate revenues which, in the near-term will be used to implement its strategic building
plan in TRD.
Praliciguat is an orally administered, once-daily systemic sGC stimulator. On June 3, 2021, Cyclerion entered into a license agreement with
Akebia Therapeutics Inc. (“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.
On December 13, 2024, Cyclerion announced that Cyclerion and Akebia have re-negotiated a mutually beneficial amendment to their exclusive
license agreement for praliciguat, a systemic sGC stimulator. Under this new license amendment, Cyclerion 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. The Company is eligible to receive additional milestone cash payments of up
to approximately $558.5 million in total potential future development, regulatory, and commercialization milestone payments for praliciguat. In exchange
for a reduction in certain development milestone payments, Cyclerion is 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 the Company upon signing of the license agreement.
Olinciguat is a Phase 2, orally administered, once-daily, vascular sGC stimulator. On July 22, 2024, the Company 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 the
Company an Option fee of $150,000 in August 2024. The Optionee may exercise the Option on or before February 22, 2025, which may be extended for an
additional two-month period for an additional fee of $25,000 (the “Option Period”). If the Optionee exercises the Option during the Option Period, the
Optionee and the Company 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 the Company. In addition, the Optionee has agreed to reimburse the Company for certain patent expenses incurred during the Option period.
Zagociguat is a clinical-stage CNS-penetrant sGC stimulator that has shown rapid improvement in cerebral blood flow, functional brain
connectivity, brain response to visual stimulus, cognitive performance, and biomarkers
F-8
associated mitochondrial function and inflammation in clinical studies. CY3018 is a CNS-targeted sGC stimulator that preferentially localizes to the brain
and has a pharmacology profile that suggests its potential for the treatment of neuropsychiatric diseases and disorders. On July 28, 2023, the Company sold
Zagociguat and CY3018 to Tisento Therapeutics, Inc. (“Tisento”), a newly formed private company focused on their development, 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. See “Asset Purchase Agreement” and “Note 4”
below.
Cyclerion GmbH, a wholly owned subsidiary, was incorporated in Zug, Switzerland on May 3, 2019. The functional currency is the Swiss franc.
Cyclerion GmbH was liquidated and de-registered in May 2024.
Cyclerion Securities Corporation, a wholly owned subsidiary, was incorporated in Massachusetts on November 15, 2019 and was granted
securities corporation status in Massachusetts.
Stock Purchase Agreement
In March 2023, the Company entered into a stock purchase agreement with the Company's former Chief Executive Officer (the “CEO”) pursuant
to which he invested $5 million in cash for 225,000 shares of common stock and 351,037 shares of Series A Convertible Preferred Stock of the Company at
a price of $8.68 per share (after giving effect to the 1-for-20 reverse stock split the Company implemented on May 15, 2023). The Series A Convertible
Preferred Stock is convertible into shares of the Company's common stock on a one-to-one basis. The closing of the equity investment took place on May
19, 2023, and (to comply with Nasdaq listing requirements) the Company's shareholders approved such convertibility on July 19, 2023.
Asset Purchase Agreement
On May 11, 2023, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with an investor group that
included the former CEO, JW Celtics Investment Corp and JW Cycle Inc. which subsequently changed their names to Tisento Therapeutics Holdings Inc.
(“Tisento Parent”) and Tisento. Upon the closing on July 28, 2023, of the transactions contemplated by the Asset Purchase Agreement, the Company sold
to Tisento specified assets relating to the Company’s zagociguat and CY3018 programs (the "Transferred Assets") and Tisento assumed certain liabilities
relating thereto, including, but not limited to (i) liabilities, costs and expenses arising after the date of the Asset Purchase Agreement relating to the
employment of certain Cyclerion employees and the conduct of certain preclinical and clinical trial activities prior to the closing of the transactions
contemplated by the Asset Purchase Agreement, and (ii) liabilities relating to such assets to the extent relating to the period after the closing of the
transaction. In consideration for such sale and assumption, at such closing the Company received proceeds of $8.0 million as cash consideration, $2.4
million as reimbursement for certain operating expenses related to such assets for the period between signing and closing of the Asset Purchase Agreement,
and shares of common stock of Tisento Parent comprising 10% of the then issued and outstanding equity securities of Tisento Parent immediately
following such closing, subject to certain protections against dilution.
Reverse Stock Split
On May 15, 2023, the Company filed Articles of Amendment to the Company's Restated Articles of Organization with the Secretary of
Commonwealth of Massachusetts to effect a 1-for-20 reverse stock split of the Company's issued and outstanding shares of common stock. The reverse
stock split was reflected on the Nasdaq Capital Market beginning with the opening of trading on May 16, 2023. All share amounts and per share amounts
disclosed in this Annual Report on Form 10-K have been adjusted retroactively to reflect the reverse stock split for all periods presented.
At-the-Market Offering
On September 3, 2020, the Company entered into a Sales Agreement (the “Sales Agreement”) with Jefferies LLC (“Jefferies”) with respect to an
at-the-market offering (the “ATM Offering”) under the 2020 Shelf. Under the ATM Offering, the Company could offer and sell, from time to time at its
sole discretion, shares of its common stock, having an aggregate offering price of up to $50.0 million through Jefferies as its sales agent. The
F-9
Company agreed to pay Jefferies cash commissions of 3.0 percent of the gross proceeds of sales of common stock which could be sold under the Sales
Agreement. No shares of common stock have been issued or sold under the ATM Offering in 2023. The 2020 Shelf expired in July 31, 2023. Due to the
current market value of our publicly traded common stock held by non-affiliates, our ability to raise future funding though a shelf offering will be limited
to the value of one-third of our public float until such time as the public float exceeds $75 million.
Basis of Presentation
The consolidated financial statements and the related disclosures have been prepared in accordance with U.S. generally accepted accounting
principles. In the opinion of management, the consolidated financial statements reflect all normal recurring adjustments considered necessary for a fair
presentation of the Company’s financial position and the results of its operations for the fiscal years presented.
The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries, Cyclerion Securities
Corporation and Cyclerion GmbH which was dissolved in May 2024. All significant intercompany accounts and transactions have been eliminated in the
preparation of the accompanying consolidated financial statements.
Going Concern
At each reporting period, in accordance with Accounting Standards Codification ("ASC") 205-40, Going Concern, 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.
This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully
implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the
mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. 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 its analysis, management excluded certain elements of its operating plan that cannot be considered probable. Under ASC 205-40, the
future receipt of potential funding from future partnerships, equity or debt issuances, certain cost reduction measures and the potential milestones from the
Akebia agreement cannot be considered probable at this time because these plans are not entirely within the Company’s control and/or have not been
approved by the Board of Directors as of the date of these consolidated financial statements.
The Company expects that its cash and cash equivalents as of December 31, 2024, will be sufficient to fund operations through mid-2025,
however the Company will need to obtain additional funding to sustain operations as it expects to continue to generate operating losses for the foreseeable
future. The Company's expectation to generate negative operating cash flows in the future and the need for additional funding to support its planned
operations, raise substantial doubt regarding the Company’s ability to continue as a going concern. Management's plans to alleviate the conditions that raise
substantial doubt include reduced spending, and the pursuit of additional capital. Management has concluded the likelihood that its plan to successfully
obtain sufficient funding, or adequately reduce expenditures, while reasonably possible, is less than probable. Accordingly, the Company has concluded
that substantial doubt exists about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements
do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that
might result from the outcome of the uncertainties described above.
F-10
2. Summary of Significant Accounting Policies
Segment Information
The Company operates and manages its business as a single segment for the purposes of assessing performance and making operating decisions.
The Company’s president and chief executive officer, who is the chief operating decision maker ("CODM"), reviews the Company’s financial information
on a consolidated basis for purposes of evaluating financial performance and allocating resources. When evaluating the Company’s financial performance,
the CODM regularly reviews net loss, non-operating expenses and operating expenses excluding non-cash stock based compensation expense.
Discontinued Operations
In accordance with ASC 205-20 “Presentation of Financial Statements: Discontinued Operations”, a disposal of a component of an entity or a
group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a
major effect on an entity’s operations and financial results. In the period in which the component meets held-for-sale or discontinued operations criteria the
major current assets, non-current assets, current liabilities, and non-current liabilities shall be reported as components of total assets and liabilities separate
from those balances of the continuing operations and disclosed in the notes to financial statements. At the same time, the results of all discontinued
operations, less applicable income taxes, shall be reported as components of net loss separate from the net income (loss) of continuing operations.
The Transferred Assets met the definition of a discontinued operation. Accordingly, the Company has classified the results of the Transferred
Assets as discontinued operations in its consolidated statements of operations for all periods presented. All assets and liabilities associated with the
Transferred Assets were classified as assets and liabilities of discontinued operations in the Note 4, "Discontinued Operations". All amounts included in the
notes to the consolidated financial statements relate to continuing operations unless otherwise noted. For additional information, see Note 4, “Discontinued
Operations”.
Variable Interest Entities
The Company reviews each legal entity in which it has a financial interest to determine whether or not the entity is a variable interest entity or
VIE. If the entity is a VIE, the Company assesses whether or not it is the primary beneficiary of that VIE based on a number of factors, including (i) which
party has the power to direct the activities that most significantly affect the VIE’s economic performance, (ii) the parties’ contractual rights and
responsibilities pursuant to any contractual agreements and (iii) which party has the obligation to absorb losses or the right to receive benefits from the
VIE. If the Company determines that it is the primary beneficiary of a VIE, it consolidates the financial statements of the VIE into its consolidated financial
statements at the time that determination is made. On a quarterly basis, the Company evaluates whether it continues to be the primary beneficiary of any
consolidated VIEs. If the Company determines that it is no longer the primary beneficiary of a consolidated VIE, or no longer has a variable interest in the
VIE, the Company deconsolidates the VIE in the period that the determination is made.
Investment
The Company accounts for investments in equity securities without a readily determinable fair value at cost, minus impairment. If the Company
identifies observable price changes in orderly transactions for an identical or a similar investment of the same issuer, the Company will measure the equity
security at fair value as of the date that the observable transaction occurred in accordance with ASC Topic 321, Investments-Equity Securities.
Use of Estimates
The preparation of consolidated financial statements in accordance with U.S. generally accepted accounting principles ("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
F-11
consolidated 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 financial statements include those related to revenue,
fair value determination of other investment, impairment of long-lived assets, valuation procedures for right-of-use ("ROU") assets and operating lease
liabilities, income taxes, including the valuation allowance for deferred tax assets, research and development expenses, contingencies, share-based
compensation and going concern. 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.
Property and Equipment
Property and equipment are recorded at cost, and are depreciated when placed into service using the straight-line method based on their estimated
useful lives as follows:
Asset Description
Estimated Useful
Life (In Years)
Computer equipment
3
Software
3
Software 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.
Property and equipment that is no longer required for the business is considered disposed of when it ceases to be used. Disposals are either sold
or retired and the net book value is removed from the consolidated balance sheet and a corresponding gain or loss on the sale or disposal is recognized as a
component of operating expenses in the consolidated statements of operations and comprehensive loss.
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
F-12
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 former foreign subsidiary is its local currency, the Swiss franc. The assets and liabilities of the
Company’s former 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 former foreign subsidiary was
included as a foreign currency translation adjustment in the consolidated statements of stockholders’ equity and as a component of comprehensive loss in
the consolidated 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 re-measurement of intercompany balances are recorded in the consolidated statements of operations.
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 believes that credit risks
associated with these agreements 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, 2024 or 2023.
Impairment of Long-Lived Assets
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, 2024 or 2023, except for the impairment loss of right-of-use assets recognized during the year ended December 31, 2023.
Leases
The Company had a property lease for its headquarters location at 301 Binney Street, Cambridge, MA (the “Head Lease”). The Company
determined if the arrangement was a lease at the inception of the contract. The asset component of the Company’s operating leases was recorded as
operating lease right-of-use assets, and the liability component was recorded as current portion of operating lease liabilities and operating lease liabilities,
net of current portion, in the Company’s consolidated balance sheets.
Right-of-use assets (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 ROU assets are adjusted for incentives
received.
Lease cost was recognized on a straight-line basis over the lease term, and included amounts related to short-term leases. Variable lease costs that
do not depend on an index or rate were recognized as incurred.
F-13
ROU assets and operating lease liabilities were remeasured upon certain modifications to leases using the present value of remaining lease
payments and estimated incremental borrowing rate upon lease modification. The difference between the remeasured ROU assets and the operating lease
liabilities were recognized as a gain or loss in operating expenses. The Company reviewed any changes to its lease agreements for potential modifications
and/or indicators of impairment of the respective ROU asset. During the year ended December 31, 2023, the Company recorded $3.3 million for
impairment of ROU asset. See Note 9, “Leases,” for additional information.
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 derives revenue from (1) license agreement and (2)
option to license agreement which are fully described in Note 15, License Agreement.
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. The
Company estimates the period over which such services will be performed and the level of effort to be expended in each period. If actual timing of
performance or the level of effort varies from the estimate, the Company will adjust the amounts recorded accordingly. The Company has not experienced
any material differences between accrued or prepaid costs and actual costs since inception.
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 and outside consultants providing 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
The Company is primarily subject to U.S. Federal and Massachusetts state income taxes. For federal and state income taxes, deferred tax assets
and liabilities are recognized based upon temporary differences between the financial statement and the tax basis of assets and liabilities. Deferred income
taxes are based upon prescribed rates and enacted laws applicable to periods in which differences are expected to reverse. A valuation allowance is
recorded when it is more likely than not that some portion or all of the deferred tax assets will not be
F-14
realized. Accordingly, the Company provides a valuation allowance, if necessary, to reduce deferred tax assets to amounts that are realizable.
The tax positions taken or expected to be taken in the course of preparing the Company tax returns are required to be evaluated to determine
whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet a more-likely-
than-not threshold would be recorded as a tax expense in the current year. 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. There were no uncertain tax positions that
require accrual or disclosure in the consolidated financial statements as of December 31, 2024, and 2023. The Company’s policy is to recognize interest
and penalties related to income tax, if any, in income tax expense. As of December 31, 2024 and 2023, the Company has no accruals for interest or
penalties related to income tax matters.
Patent Costs
Patent fees and patent related costs in connection with filing and prosecuting patent applications are expensed as incurred and are classified as
general and administrative expenses in the accompanying consolidated financial statements. The Company incurred and recorded as operating expense
legal and other fees related to patents of approximately $0.6 million and $1.1 million for the years ended December 31, 2024 and 2023, respectively.
Interest and Other Income, Net
For the year ended December 31, 2024 and 2023, interest and other income, net consisted of a $0.2 million and $0.4 million of interest income
related to interest generated from the Company's cash and cash equivalents balances, respectively.
Subsequent Events
The Company considers events or transactions that have occurred after the balance sheet date of December 31, 2024, 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 16, Subsequent Events.
Recently Issued 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 financial
statements, the Company did not adopt any new accounting pronouncements during the years ended December 31, 2024 and 2023, that had a material
effect on its consolidated financial statements.
Recently Adopted Accounting Pronouncements
In June 2016 the FASB issued ASU 2016-13, Financial Instruments-Credit Losses. This standard requires entities to measure all expected credit
losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. As a
smaller reporting company, ASU 2016-13 became effective for the Company for fiscal years beginning after December 15, 2022. The Company adopted
ASU 2016-13 in the first quarter of 2023, and the adoption of this standard did not have any impact on the Company's financial position or results of
operations.
F-15
In November 2023 the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which
expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.
The Company adopted this standard effective January 1, 2024 using a retrospective method, and the adoption of this standard did not have any impact on
the Company's financial position or results of operations. For further information, refer to the Segments section in Note 2 “Summary of Significant
Accounting Policies.”
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 financial statements upon
adoption.
3. Fair Value of Financial Instruments
The Company’s cash equivalents are generally classified within Level 1 of the fair value hierarchy. The following tables present information
about the Company’s financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such
fair values as of December 31, 2024 and December 31, 2023 (in thousands):
Fair Value Measurements as of December 31, 2024:
Level 1
Level 2
Level 3
Total
Cash equivalents:
Money market funds
$
3,025 $
— $
— $
3,025
Cash equivalents
$
3,025 $
— $
— $
3,025
Fair Value Measurements as of December 31, 2023:
Level 1
Level 2
Level 3
Total
Cash equivalents:
Money market funds
$
7,244 $
— $
— $
7,244
Cash equivalents
$
7,244 $
— $
— $
7,244
During the year ended December 31, 2024 and 2023, there were no transfers between levels. The fair value of the Company's cash equivalents,
consisting of money market funds, is based on quoted market prices in active markets with no valuation adjustment.
The Company believes the carrying amounts of its accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued
expenses approximate their fair value due to the short-term nature of these amounts.
4. Discontinued Operations
On May 11, 2023, the Company entered into the Purchase Agreement with Tisento for Tisento’s acquisition of substantially all of the assets
comprising the Company’s zagociguat and CY3018 programs, in exchange for consideration at closing of $8.0 million, the reimbursement of employee
expenses or R&D expenses of $2.4 million that Tisento reimbursed the Company for upon closing, and 10% of the issued and outstanding shares of Tisento
Parent (Note 5). Upon closing of the transaction, the Company transferred certain fully depreciated software included within property and equipment to
Tisento.
The carrying value of the disposal group was lower than its fair value, less costs to sell, and accordingly, a gain on disposal was recorded during
the year ended December 31, 2023. The operations of the Transferred Assets are presented as discontinued for all periods presented. The transaction closed
on July 28, 2023.
The following table presents the results of the discontinued operations for the year ended December 31, 2023 (in thousands):
F-16
Year Ended December
31, 2023
Revenues:
Revenue from grants
$
50
Total revenues
50
Cost and expenses:
Research and development
4,439
General and administrative
4,033
Total cost and expenses
8,472
Loss from operations
(8,422 )
Gain on disposal of discontinued operations
15,752
Net gain from discontinued operations
$
7,330
The following table presents the significant non-cash item for the discontinued operations that are included in the accompanying consolidated
statements of cash flows (in thousands):
Year Ended December
31, 2023
Cash flows from operating activities:
Share-based compensation expense
$
505
The transaction consideration received from the sale of the Transferred Assets were as follows (in thousands):
Amount
Closing payment
$
8,000
Expense reimbursement
2,402
Investment in Tisento Parent
5,350
Gross transaction consideration from the sale
15,752
Net assets sold
—
Gain on disposal of discontinued operations
$
15,752
During the year ended December 31, 2023, the Company incurred $1.3 million in closing costs associated with the sale of the Transferred Assets.
The Company also incurred $0.9 million in transaction costs associated with the sale of the Transferred Assets during the year ended December 31, 2023,
respectively. All of the closing and transaction costs were recognized as part of discontinued operations - general and administrative.
5. Other Investment
On July 28, 2023, the Company closed the transactions contemplated by the Asset Purchase Agreement receiving proceeds of $8.0 million as
cash consideration, approximately $2.4 million as reimbursement for certain operating expenses related to zagociguat and CY3018 programs for the period
between signing and closing of the transaction, and 10% of all of Tisento Parent's outstanding equity securities which fair value was determined to be $5.3
million at the time of closing. The Company’s investment in Tisento Parent does not provide it with significant influence over Tisento Parent.
The Company has determined that the Company’s investment in Tisento Parent is an equity security, whereby such investment does not give the
Company a controlling financial interest or significant influence over the investee. Further, the Company assessed the accounting for its investment in
Tisento Parent in accordance
F-17
with ASC 810-10, Consolidation—Overall. After determining that no scope exception applies under the guidance of ASC 810-10-15-12 and ASC 810-10-
15-17, the Company concluded that it has a variable interest in Tisento Parent through its investment in Tisento Parent common stock. Tisento Parent does
not have sufficient equity to finance its activities without additional subordinated financial support as Tisento Parent is a startup entity in its early stages of
raising funds and will require significant capital to advance its programs to commercial stage. Therefore, the Company concluded that its investment in
Tisento Parent is a variable interest entity (“VIE”) in accordance with ASC 810-10-15-14(a) and is subject to potential consolidation under the VIE model.
However, all activities that most significantly impact Tisento Parent and its subsidiary’s economic performance are directed by the Tisento Parent board
and the board approves decisions by a simple majority. Based on the board composition, the Company determined that no one party has control over the
Tisento Parent board and power is not shared because the activities that most significantly affect Tisento Parent and its subsidiary’s economic performance
do not require the consent of all of the parties. Rather, all decisions are made by a simple majority vote of the Tisento Parent board. Therefore, because the
Company controls no director of Tisento Parent, the Company cannot unilaterally direct any of the activities that most significantly impact Tisento Parent
and its subsidiary’s economic performance. Accordingly, the Company does not hold a controlling financial interest in Tisento Parent. Because both
criteria (a) and (b) above have to be met for the application of the guidance in ASC 810-10-25-44B and criteria (a) has not been met, The Company
concluded that it should not consolidate Tisento under the VIE model.
Accordingly, the Company has accounted for the investment as a financial instrument without a readily determinable fair value. Such investment
is recorded using the measurement alternative for investments without readily determinable fair values, whereby the investment is measured at cost less any
impairment recorded or adjustments for observable price changes. An impairment loss is recognized in the consolidated statements of operations and
comprehensive loss equal to the amount by which the carrying value exceeds the fair value of the investment. As of December 31, 2024, no impairment
loss was recognized. The Company considers the cost of the investment to be the maximum exposure to loss as a result of its involvement with the non-
affiliated entity.
The initial fair value of the investment in Tisento Parent was determined by reference to the risk-adjusted net assets value using the discounted
cash flow method. The estimated net assets value of Tisento Parent includes the cash generated/used from the operations and the proceeds from equity
financing. Valuations were derived by reference to observable valuation measures for comparable companies or transactions, including weighted average
cost of capital (21% to 23%), terminal decline rate (25% to 75%) and the discount rate referenced by a two-year treasury rate of 4.01%.
6. Property and Equipment
Property and equipment, net consisted of the following (in thousands):
December 31,
December 31,
2024
2023
Software
$
126 $
126
Property and equipment, gross
126
126
Less: accumulated depreciation and amortization
(126 )
(126 )
Property and equipment, net
$
— $
—
During the year ended December 31, 2024 and 2023, the Company did not record depreciation and amortization expenses.
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
F-18
December 31,
December 31,
2024
2023
Professional fees
$
220 $
685
Other
63
113
Accrued expenses and other current liabilities
$
283 $
798
8. Commitments and Contingencies
Other Funding Commitments
In the normal course of business, the Company enters into contracts with clinical research organizations and other third parties for clinical and
preclinical research studies and other services and products for operating purposes. 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.
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, 2024 or December 31, 2023.
Separation Benefits
As part of the separation benefit of the former Chief Financial Officer, the Company 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. The Company has no further separation benefits obligation as of December 31, 2024.
9. Leases
On September 15, 2020, the Company entered into a Sublease Termination Agreement (the "Sublease Termination Agreement") to terminate its
sublease of 15,700 rentable square feet, of its leased premises under the Head Lease. Under the terms of the Sublease Termination Agreement, the
subtenant was relieved of its obligation to provide future cash rental payments to the Company. The agreements requiring the former subtenant to provide
licensed rooms and services to the Company free of charge through the original sublease term survived the sublease termination. The Company gained
access to the licensed rooms and services beginning in the third quarter of 2021. The letter of credit security deposit related to the sublease was released.
The Company determined that the Sublease Termination Agreement constituted a non-monetary exchange under ASC 845 Nonmonetary
Transactions (“ASC 845”) where, in return for the free rooms and the services, the Company agreed to terminate its rights and obligations under the
sublease agreement. In accordance with ASC 845, the Company determined that the accounting for the transaction should be based on the fair value of
assets or services involved. During the year ended December 31, 2020, the Company estimated the fair value of the rooms and services to be approximately
$1.5 million and $2.9 million, respectively.
F-19
The Company determined that the licensed rooms represent a lease under ASC Topic 842 Leases. The Company obtained control of the rooms in
the third quarter of 2021 and the prepaid rooms balance of approximately $1.4 million was reclassified from other assets to a ROU asset. The related lease
expense is recognized on a straight-line basis over the lease term of 8.88 years. The Company recorded $0.2 million of lease expense during the year ended
December 31, 2023. The Company determined that the licensed services represent a non-lease component, which is recognized separately from the lease
component for this asset class. The expense related to the licensed services is recognized on a straight-line basis over the period the services are received.
The Company recorded $0.1 million for the year ended December 31, 2023. Both the lease expense and services expense are recognized as a component of
research and development costs in the consolidated statements of operations and comprehensive loss.
After the closing of the Asset Purchase Agreement, the Company had no plans in the foreseeable future to use the licensed rooms and the
Company is restricted from subleasing the rooms. In August 2023, the ROU asset and other assets were fully impaired, and the Company recognized a $3.3
million impairment loss during the year ended December 31, 2023. No lease expense or services expense was recognized during the year ended December
31, 2024.
10. Share-based Compensation Plans
In 2019, Cyclerion adopted 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. The 2019 Equity Plan provides for stock options,
restricted stock awards ("RSAs") and restricted stock units (“RSUs”).
Cyclerion also mirrored two of Ironwood Pharmaceuticals, Inc. ("Ironwood") 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 following table provides share-based compensation reflected in the Company’s consolidated statements of operations and comprehensive
loss for the years ended December 31, 2024 and 2023 (in thousands):
Year Ended
December 31,
2024
2023
Research and development
$
91 $
421
General and administrative
534
646
$
625 $
1,067
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, 2024 is as follows:
F-20
Weighted
Weighted
Average
Average
Average
Remaining
Intrinsic
Number
Exercise
Contractual
Value (in
of Options
Price
Term (Years)
thousands)
Outstanding as of December 31, 2023
291,368 $
189.09
4.6 $
—
Granted
55,849 $
3.30
Exercised
— $
—
Cancelled or forfeited
(11,769 ) $
165.74
Outstanding as of December 31, 2024
335,448 $
158.98
4.7 $
—
Exercisable at December 31, 2024
258,558 $
199.26
3.5 $
—
During the years ended December 31, 2024 and 2023, the Company granted stock options to purchase an aggregate of 55,849 shares and 4,000
shares, respectively, at weighted average grant date fair values per option share of $2.80 and $2.95 respectively.
There were no options exercised during the year ended December 31, 2024 and 2023.
As of December 31, 2024, the unrecognized share-based compensation expense, net of estimated forfeitures, related to all unvested time-based
stock options held by the Company’s employee and non-employees is $0.4 million and the weighted average period over which that expense is expected to
be recognized is 3.64 years.
The weighted-average Black-Scholes assumptions used in estimating the fair value of the stock options granted by Cyclerion during the years
ended December 31, 2024 and 2023 were as follows:
Year ended December 31,
2024
2023
Weighted average risk-free interest rate
3.64 %
3.47 %
Expected dividend yield
—
—
Expected option term (in years)
6.0
6.0
Expected stock price volatility
111.97 %
93.19 %
For the years ended December 31, 2024 and 2023, 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.
The Company has granted 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, 2024 and 2023, there were no shares that vested as a result of performance
milestone achievements. No share-based compensation expense related to these performance-based options was recognized during the years ended
December 31, 2024, and 2023, respectively.
Market-based Stock Options
The Company also has previously 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 when 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. During the year ended December 31, 2024, 7,500 stock options containing market conditions were forfeited and there were no
outstanding stock options containing market conditions as of December 31, 2024.
F-21
A summary of stock awards containing market conditions activity for the year ended December 31, 2024 is as follows:
Weighted
Weighted
Average
Aggregate
Average
Remaining
Intrinsic
Number of
Exercise
Contractual
Value (in
Options
Price
Term (years)
thousands)
Outstanding as of December 31, 2023
7,500 $
40.20
5.9 $
—
Granted
—
—
—
—
Exercised
—
—
—
—
Cancelled or forfeited
(7,500 ) $
40.20
— $
—
Outstanding as of December 31, 2024
— $
—
— $
—
Exercisable at December 31, 2024
— $
—
— $
—
No stock options containing market conditions were granted during the years ended December 31, 2024 and 2023.
Restricted Stock Awards
The Company granted 65,000 and 200,000 RSAs during the year ended December 31, 2024 and 2023, respectively. The fair value of all RSAs 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 RSA activity for the years ended December 31, 2024 is as follows:
Weighted Average
Number
Grant Date
of Shares
Fair Value
Unvested as of December 31, 2023
170,937 $
2.28
Granted
65,000
3.35
Vested
(71,763 )
2.61
Forfeited
—
—
Unvested as of December 31, 2024
164,174 $
2.55
As of December 31, 2024, the unrecognized share-based compensation expense, net of estimated forfeitures, related to all unvested RSAs held
by the Company’s directors is $0.4 million and the weighted average period over which that expense is expected to be recognized is 2.68 years.
11. 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 as follows:
F-22
Year Ended
December 31,
2024
2023
Numerator:
Net loss from continuing operations (in thousands)
$
(3,057 ) $
(12,593 )
Net gain from discontinued operations (in thousands)
—
7,330
Total net loss (in thousands)
(3,057 )
(5,263 )
Denominator:
Weighted average shares used in calculating net gain (loss) per share — basic and diluted (in
thousands)
2,518
2,338
Net gain (loss) per share — basic and diluted
Net loss per share from continuing operations
$
(1.21 ) $
(5.39 )
Net gain per share from discontinued operations
—
3.14
Total loss per share
$
(1.21 ) $
(2.25 )
The Company excludes potential shares of common stock related to Preferred Stock, stock options and RSAs from the calculation of diluted net
loss per share since the inclusion of such shares would be anti-dilutive. The following table sets forth potential shares that were considered anti-dilutive for
the years ended December 31, 2024 and 2023:
Year Ended
December 31,
2024
2023
Preferred Stock
351,037
351,037
Stock Options
335,448
298,868
RSAs
164,174
170,937
850,659
820,842
12. Income Taxes
There was no provision for income taxes for the years ended December 31, 2024, and 2023, due to the Company’s operating losses and a full
valuation allowance on deferred tax assets. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows (in thousands):
F-23
Year Ended December 31,
2024
2023
U.S.
$
(3,060 ) $
(5,181 )
International
3
(82 )
Loss before benefit from income taxes
$
(3,057 ) $
(5,263 )
Income tax benefit using U.S. federal statutory rate
$
(642 ) $
(1,105 )
State income taxes, net of federal benefit
(155 )
(5 )
Non-deductible share-based compensation
22
(9 )
Share-based compensation - shortfalls/(windfalls)
70
1,196
Permanent differences
(4 )
1
Tax credits
(11 )
(500 )
Other
0
17
Change in valuation allowance
720
405
$
— $
—
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. The Company's income tax rate in foreign jurisdictions is
lower than the Company's income tax rate in the United States.
Deferred tax assets (liabilities) consist of the following as of December 31, 2024 and 2023 (in thousands):
Year Ended December 31,
2024
2023
Deferred tax assets:
Net operating loss carryforwards
$
53,281 $
48,535
Tax credit carryforwards
10,383
10,388
Share-based compensation
7,122
7,071
Capitalized research and development
12,370
16,440
Accruals and reserves
—
2
Total deferred tax assets
$
83,156 $
82,436
Valuation allowance
(83,156 )
(82,436 )
Net deferred tax assets
$
— $
—
The Company 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, 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, 2024 and December 31, 2023. Management reevaluates the positive and
negative evidence on a quarterly basis.
The valuation allowance increased by approximately $0.7 million during the year ended December 31, 2024 primarily due to increases in
capitalized research and development expenses, net operating losses, tax credit carryforwards and deferred tax assets related to share-based compensation.
The Company 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, 2024 and 2023, Cyclerion has federal net operating loss carryforwards of approximately $195 million and
$177 million, respectively, to offset future federal taxable income that will be carried forward indefinitely until utilized. As of December 31, 2024, and
2023, Cyclerion had state net operating loss carryforwards of approximately $196 million and $178 million, respectively, to offset future state taxable
income, which will begin to expire in 2040 and will continue to expire through 2042. Cyclerion also had tax credit carryforwards of approximately $10.8
million as of December 31, 2024
F-24
and 2023, to offset future federal and state income taxes. Federal credits begin to expire in 2040 and will continue to expire through 2041. State credits
begin to expire in 2023 and continue through 2034.
The Company’s ability to use its 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 since its
inception on a standalone basis, it may be subject to tax audits by federal and state taxing authorities in the future. 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, 2024 and 2023. Cyclerion will recognize interest and penalties, if any,
related to uncertain tax positions in income tax expense. As of December 31, 2024 and 2023, no interest or penalties have been accrued. There are no
current federal or state income tax audits in progress.
13. Defined Contribution Plan
The Company has established a defined contribution 401(k) Savings Plan which allows eligible employees to contribute from 1% to 100% of
their compensation, subject to certain IRS limits. The Company's contributions to the plan are at the sole discretion of the board of directors. Currently, the
Company provides a matching contribution of 75% of the employee’s contributions, up to $6,000 annually.
Included in compensation expense is de minimis and approximately $0.1 million related to the defined contribution 401(k) Savings Plan for the
years ended December 31, 2024 and 2023, respectively.
14. Workforce Reduction
On October 6, 2022, the Company began a reduction of its current workforce by thirteen (13) full-time employees to align its resources with its
current priorities of focusing on a mitochondrial disease-focused strategy. The workforce reduction was completed in the fourth quarter of 2022. No cost
related to the 2022 Workforce Reduction was recognized during the year ended December 31, 2024 and 2023.
The Company had further reductions of workforce in 2023 in connection with the sale of the Transferred Assets to Tisento and change to the
Company’s strategy. The Company recorded total costs of approximately $0.6 million related to the reduction in workforce during the year ended
December 31, 2023. No cost related to further workforce reductions was recognized during the year ended December 31, 2024.
All the accrued liabilities were paid off as of December 31, 2023 and no activities occurred during the year ended December 31, 2024. The
following table summarizes the accrued liabilities activity recorded in connection with the reduction in workforce for the year ended December 31, 2023
(in thousands):
F-25
Amounts
accrued at
December 31,
2022
Charges
Amount
paid
Adjustments
Amounts
accrued at
December 31,
2023
Workforce reductions
$
(809 ) $
(565 ) $
1,374 $
— $
—
Total
$
(809 ) $
(565 ) $
1,374 $
— $
—
15. License and Option Agreement
Option Agreement
On July 22, 2024, the Company 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 the Company 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 the Company. In addition, the Optionee has agreed to reimburse the Company for certain patent expenses incurred
during the Option period. The Company recognized revenue of $0.2 million related to the Option fee payment and expense reimbursement for the year
ended December 31, 2024.
Akebia License Agreement
On June 3, 2021, the Company and Akebia entered into a License Agreement (the “Akebia License Agreement”) relating to the exclusive
worldwide license by the Company to Akebia of our rights to the development, manufacture, medical affairs and commercialization of pharmaceutical
products containing the pharmaceutical compound known as praliciguat and other related products and forms thereof enumerated in the License Agreement
(collectively, the “Products”). Pursuant to the Akebia License Agreement, Akebia will be responsible for all future research, development, regulatory, and
commercialization activities for the Products.
Akebia paid a $3.0 million up-front payment to the Company upon signing of the License Agreement. On December 13, 2024, the Company and
Akebia entered into Amendment #1 to License Agreement (the “Amendment”) to the original License Agreement between the parties dated June 3, 2021
(the “2021 License Agreement”).
Under the terms of the Amendment, Akebia paid the Company $1.25 million in December 2024 and is obligated to pay an additional $0.5
million on or before September 30, 2025. In addition, Akebia has agreed to assume control of the preparation, filing, prosecution and maintenance of
certain Cyclerion patents, and the expenses associated therewith, at an earlier date than as originally agreed between the parties. The parties have agreed to
the reduction of certain development milestones and the increase of certain royalty rates on net sales and sublicense income. Pursuant to the terms of the
2021 License Agreement, as amended, Cyclerion is eligible to receive up to $558.5 million in total potential future development, regulatory, and
commercialization milestone payments, and Akebia will pay Cyclerion tiered royalties ranging from mid-single digit to twenty percent of net sales.
Cyclerion’s obligations to deliver certain drug products have also ceased.
Pursuant to the Akebia License Agreement, the Company determined the Akebia License Agreement represents a service arrangement under the
scope of ASC 606. Given the reversion of the rights under the Akebia License Agreement represents a penalty in substance for a termination by Akebia, the
contract term would be the stated term of the License Agreement.
The Company determined that the grant of license to its patents and trademarks, know how transfer, the assignment of regulatory submissions
and trademarks and additional knowledge transfer assistance obligations represent a single promise and performance obligation to be transferred to Akebia
over time due to the nature of the promises in the contract. The provision of development materials on hand was identified as a separate performance
F-26
obligation. However, it is immaterial in the context of the contract as the development materials are low value and do not have an alternative use to the
Company.
The consideration related to sales-based milestone payments, including royalties, will be recognized when the related sales occur as these
amounts have been determined to relate predominantly to the license. The Company will re-evaluate the probability of achievement of the milestones and
any related constraints each reporting period.
16. Subsequent Events
The Company has evaluated all events and transactions that occurred after the balance sheet date through the date the consolidated financial
statements were issued.
On February 4, 2025, the Company filed a Registration Statement on Form S-3 with 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.
Exhibit 4.1
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
General
The following description of our capital stock is intended as a summary only and is qualified in its entirety by reference to our articles of
organization and bylaws, the Annual Report on Form 10-K to which this description is an exhibit, any and all of which may be amended from time to time,
and to the applicable provisions of the Massachusetts Business Corporation Act (“MBCA”).
Our authorized capital stock consists of 400,000,000 shares of our common stock and 100,000,000 shares of our preferred stock, all of which
preferred stock is undesignated, except that 500,000 shares of our Preferred Stock are designated as Series A Convertible Preferred Stock. As of December
31, 2024 and March 3, 2025, there were 2,710,096 shares of common stock outstanding and 351,037 shares of Series A Convertible Preferred Stock
outstanding.
Common Stock
Dividend Rights
Subject to preferences that may apply to shares of preferred stock outstanding, holders of outstanding shares of common stock are entitled to
receive dividends out of assets legally available at the times and in the amounts as our board of directors may from time to time determine.
Voting Rights
Each outstanding share of common stock is entitled to one vote on all matters submitted to a vote of shareholders. Holders of shares of our
common stock have no cumulative voting rights.
Preemptive Rights.
Our common stock is not entitled to preemptive or other similar subscription rights to purchase any of our securities.
Conversion or Redemption Rights
Our common stock is neither convertible nor redeemable.
Liquidation Rights
Upon our liquidation, the holders of our common stock will be entitled to receive pro rata our assets which are legally available for distribution,
after payment of all debts and other liabilities and subject to the prior rights of any holders of preferred stock then outstanding.
Listing
Our common stock is listed on the Nasdaq Global Select Market under the trading symbol "CYCN."
Anti-takeover Effects of Our Articles of Organization and Our Bylaws
Our articles of organization and bylaws contain certain provisions that are intended to enhance the likelihood of continuity and stability in the
composition of our board of directors but which may have the effect of delaying, deferring or preventing a future takeover or change in control of us unless
such takeover or change in control is approved by our board of directors. These provisions include:
Action by Written Consent and Special Meetings of Shareholders
Our articles of organization provide that shareholder action can be taken only at an annual or special meeting of shareholders or by the
unanimous written consent of all shareholders in lieu of such a meeting. Our articles of organization and the bylaws also provide that, except as otherwise
required by law, special meetings of the shareholders can only be called pursuant to a resolution adopted by a majority of our board of directors or holders
of at least 40% of our then outstanding common stock. Except as described above, shareholders are not permitted to call a special meeting or to require our
board of directors to call a special meeting.
Advance Notice Procedures
Our bylaws contain an advance notice procedure for shareholder proposals to be brought before an annual meeting of our shareholders, including
proposed nominations of persons for election to the board of directors. Shareholders at an annual meeting will only be able to consider proposals or
nominations specified in the notice of meeting or brought before the meeting by or at the direction of our board of directors or by a shareholder who was a
shareholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has given our Secretary timely written notice, in
proper form, of the shareholder's intention to bring that business before the meeting. Although our bylaws do not give our board of directors the power to
approve or disapprove shareholder nominations of candidates or proposals regarding other business to be conducted at a special or annual meeting, the
bylaws may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed or may discourage or deter
a potential acquirer from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of us.
Proxy Access
Our bylaws provide that a shareholder or a group of shareholders meeting certain conditions may nominate candidates for election as a director at
an annual meeting of our shareholders using "proxy access" provisions. These provisions allow one or more shareholders (up to 20, collectively), owning at
least 3% of our outstanding common stock continuously for at least three years, to nominate for election to our board of directors and to be included in our
proxy materials up to the greater of two individuals or 20% of our board of directors, subject to the provisions included in our bylaws, including the
provision of timely written notice to our Secretary.
Number of Directors and Filling Vacancies and Election of Directors
Our articles of organization provide that the number of directors is established by the board of directors. Furthermore, any vacancy on our board
of directors, however occurring, including a vacancy resulting from an increase in the size of our board, may only be filled by the affirmative vote of a
majority of our directors then in office. The ability of our board of directors to increase the number of directors and fill any vacancies may make it more
difficult for our shareholders to change the composition of our board of directors. Our bylaws provide that a majority of the votes properly cast for the
election of a director shall effect such election unless there are more nominees than directorships, in which case a plurality standard shall apply.
Authorized and Unissued Shares
Our authorized but unissued shares of common stock and preferred stock are available for future issuance without shareholder approval. These
additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued shares of common stock and preferred stock could render more difficult or discourage an
attempt to obtain control of a majority of our common stock by means of a proxy contest, tender offer, merger or otherwise.
Exclusive Forum.
Our articles of organization require, to the fullest extent permitted by law, that derivative actions brought in the name of Cyclerion, actions
against our directors, officers and employees for breach of a fiduciary duty and other similar actions may be brought only in specified courts in the
Commonwealth of Massachusetts. Although we believe this provision benefits us by providing increased consistency in the application of Massachusetts
law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers.
Anti-Takeover Provisions under Massachusetts Law
Provisions Regarding Business Combinations
We are subject to the provisions of Chapter 110F of the MBCA. In general, Chapter 110F prohibits a publicly held Massachusetts corporation
from engaging in a "business combination" with an "interested stockholder" for a three-year period following the time that this stockholder becomes an
interested stockholder, unless the business combination is approved in a prescribed manner. A "business combination" includes, among other things, a
merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. An "interested stockholder" is a person who,
together with affiliates and associates, owns, or did own within three years prior to the determination of interested stockholder status, five percent or more
of the corporation's voting stock.
Under Chapter 110F, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the
following conditions: before the stockholder became interested, our board of directors approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder; upon consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 90% of the voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the voting stock outstanding, shares owned by persons who are directors and also officers, and
employee stock plans, in some instances; or at or after the time the stockholder became interested, the business combination was approved by our board of
directors of the corporation and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the
outstanding voting stock which is not owned by the interested stockholder.
A Massachusetts corporation may "opt out" of these provisions with an express provision in its original articles of organization or an express
provision in its articles of organization or bylaws resulting from a stockholders' amendment approved by at least a majority of the outstanding voting
shares. We have not opted out of these provisions. As a result, mergers or other takeover or change in control attempts of us may be discouraged or
prevented.
Provisions Regarding a Classified Board of Directors
Section 8.06(b) of the MBCA provides that, unless a company opts out of such provision, the terms of directors of a public Massachusetts
company shall be staggered by dividing the directors into three groups, as nearly equal in number as possible, with only one group of directors being
elected each year. We plan to opt out of this default requirement for a classified board of directors, and expect that all of our directors serve for one-year
terms and will be elected annually.
Pursuant to Section 8.06(c)(2) of the MBCA, however, our board of directors may unilaterally opt back into default requirements under Section
8.06(b) of the MBCA and become a classified board of directors without the approval of our stockholders. Sections 8.06(d) and (e) of the MBCA provide
that when a board of directors is so classified, (i) stockholders may remove directors only for cause, (ii) the number of directors shall be fixed only by the
vote of the board of directors, (iii) vacancies and newly created directorships shall be filled solely by the affirmative vote of a majority of the remaining
directors and (iv) a decrease in the number of directors will not shorten the term of any incumbent director. If our board of directors opts into this classified
structure in the future, these provisions are likely to increase the time required for stockholders to change the composition of our board of directors. For
example, at least two annual meetings would generally be necessary for stockholders to effect a change in a majority of the members of our board of
directors. As a result, the ability of our board of directors to adopt a classified structure in the future without the approval of our stockholders could have
the effect of
discouraging a potential acquirer from making a tender offer for a majority of the outstanding voting interest of our capital stock or otherwise attempting to
obtain control of Cyclerion.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Computershare Trust Company, N.A.
Indemnification of Directors and Officers
Our articles of organization provide that the liability of our directors for damages for any breach of fiduciary duty shall be limited to the fullest
extent permitted by law. Our bylaws also provide that we will indemnify, and advance funds to and reimburse expenses of, our directors and officers that
have been appointed by our board of directors to the fullest extent permitted by law, and that we may indemnify, and advance funds to and reimburse
expenses of, such other officers and employees as determined by our board of directors. The right of indemnification provided under our bylaws is in
addition to and not exclusive of any other rights to which any of our directors, officers or any other persons may otherwise be lawfully entitled. We have
also entered, or expect to enter, into indemnification agreements with our directors and officers, and we carry insurance policies insuring our directors and
officers against certain liabilities that they may incur in their capacity as directors and officers.
Part 8 of the MBCA authorizes the provisions, described above, that are contained in our articles of organization and bylaws. In addition,
Sections 8.30 and 8.42 of the MBCA provide that if an officer or director discharges his or her duties in good faith and with the care that a person in a like
position would reasonably exercise under similar circumstances and in a manner the officer or director reasonably believes to be in the best interests of the
corporation, he or she will not be liable for such action.
1
Exhibit 19
CYCLERION THERAPEUTICS, INC.
INSIDER TRADING PREVENTION POLICY
JULY 3, 2019
2
TABLE OF CONTENTS
Section
Title
Page
1.0
Policy
3
2.0
Scope
3
3.0
General Prohibitions
3
4.0
Key Terms
4
5.0
Timing of Transactions
5
6.0
Stock Options and Employee Stock Purchase Plan Shares
6
7.0
Planned Sale Programs
6
8.0
Special and Prohibited Transactions
7
9.0
Consequences of Violating this Policy
7
10.0
Company Assistance and Waivers
8
11.0
Policy Revision History
8
12.0
Attachments
8
13.0
Sponsorship and Management
8
3
1.0 Policy
The purpose of this policy is to reduce the potential for risk of violating U.S. securities laws by the directors, officers, other employees, and
consultants of Cyclerion Therapeutics, Inc. (the “Company”) as well as the potential for such risk by the members of their immediate families
who share the same household as the director, officer, employee, or consultant (“Immediate Family”).
2.0 Scope
This policy applies to all Cyclerion directors, officers, employees, consultants and their Immediate Family. Directors, officers, employees, and
consultants are responsible for informing their Immediate Family of, and ensuring their compliance with, their obligations under this policy. This
policy is referenced in the Cyclerion Code of Business Conduct and Ethics.
3.0 General Prohibitions
Generally speaking, U.S. securities laws prohibit the buying or selling of securities based on inside information as defined by applicable laws.
The Company seeks to comply with such laws and therefore prohibits any employee, officer, director or consultant to the Company from buying
or selling common stock or other securities of the Company (including debentures, bonds and notes), or directing trades of any securities of the
Company, while that individual is aware of material, nonpublic information relating to the Company. The Company also prohibits any employee,
officer, director, or consultant to the Company from communicating such “material nonpublic information” to someone else who then acts on it
by buying or selling the Company’s securities (known as “tipping”). This policy also applies to material nonpublic information about any other
company with whom the Company is negotiating or does business. You may not trade in the securities of any company on the basis of such
information, nor may you communicate information about any such company to others. Furthermore, the same restrictions apply to your
Immediate Family and, therefore, you are also responsible for their compliance with this policy.
On a related point, no one should discuss the Company’s material nonpublic information in public areas—such as corridors, airplanes and
restaurants—and care should be taken in the handling and disposal of company information, in whatever form or media (papers, computer drives,
etc.) containing material nonpublic information.
The Company has adopted this policy in response to the law and also to avoid even the appearance of improper conduct by anyone associated
with the Company. We strive to establish our Company’s reputation for integrity and ethical conduct and cannot afford to have it damaged.
In all cases, the responsibility for determining whether an individual is in possession of material nonpublic information rests with that individual,
and any action on the part of the Company, the General Counsel (or his or her designee) or any other employee or director pursuant to this policy
(or otherwise) does not in any way constitute legal advice or insulate an individual from liability under applicable securities laws. Individuals
may be subject to severe legal penalties and disciplinary action by the Company for any conduct prohibited by this policy or applicable securities
laws, as described below in more detail under the heading “Consequences of Violating this Policy.”
4.0 Key Terms
4.1 Insider
Any person who possesses material nonpublic information is considered an insider as to that information. Insiders include the Company’s
directors, officers, employees, independent contractors and those persons in a special relationship with the Company, e.g., its auditors,
consultants, or attorneys. The definition of insider is transaction specific; that is, an individual is an insider with respect to each material
nonpublic item of which he or she is aware.
4.2 Material Information
Information is “material” if a reasonable investor would consider it significant in a decision to buy, hold, or sell securities. Put another way,
information that could reasonably be expected to affect the price of a security, either positively or negatively, is material.
4
Common examples of information that will frequently be regarded as material is information relating to:
•
prescription results and trends, as well as the associated revenues, for any of the Company’s marketed products;
•
clinical trial results for any product candidates in the Company’s pipeline;
•
significant discoveries, or significant developments with regard to the Company’s existing products candidates;
•
negotiations or other significant developments regarding an important license, distribution agreement, joint venture, collaboration or
other contract material to the Company’s business;
•
pending FDA or other regulatory action;
•
financial results that are significantly higher or lower than generally expected by the investment community;
•
a pending or proposed merger, acquisition, sale of part of the Company’s business or acquisition of another business;
•
impending securities offerings by the Company;
•
a proposed stock split or stock dividend;
•
changes in management, the Board of Directors or other major changes in personnel;
•
major litigation developments;
•
impending financial problems; and
•
other changes in the status of any of the Company’s activities which may have an adverse or favorable impact.
Other types of information may also be material; no complete list can be given.
4.3 Nonpublic
Information is “nonpublic” or “inside information” until such time that it has been made available to investors generally and the market has had
time to digest it. As a general matter, Cyclerion considers two (2) business days to be a sufficient period for new information to be absorbed and
evaluated by the market.
Whether a particular item is “material” or “nonpublic” will be judged with the benefit of hindsight. Accordingly, when in doubt as to a particular
item of information, you should presume it to be material and not to have been disclosed to the public. Do not hesitate to contact Cyclerion’s
General Counsel or Chief Financial Officer with any questions on this.
5.0 Timing of Transactions
5.1 General Rule
If you know of material nonpublic information about the Company, you should not engage in any securities transactions before the completion of
two (2) full trading days following when the information is publicly announced in a press release or in a report filed by the Company with the
Securities and Exchange Commission (SEC). If, however, the information relates to the Company’s financial performance, you should wait until
the completion of one (1) full trading day after the earlier of (i) the issuance of the Company’s quarterly investor update, or (ii) filing by the
Company of its annual report or quarterly report with the SEC. This will typically occur during February or March, May, August, and November.
There are no exceptions to the above limitations, even for transactions that may be claimed to be justifiable for independent reasons (such as the
need to raise money for an emergency expenditure).
5.2 Blackout Periods
5
It is a violation of this policy for directors, “officers” (as defined in Section 16 of the Securities Exchange Act of 1934, as amended), and other
persons who, because they are in a position to routinely become aware of material nonpublic information, are periodically designated by the
General Counsel or Chief Financial Officer as being subject to these additional procedures to make any transaction in the market (purchase or
sale) during a “blackout period” that covers the period from the last business day of each calendar quarter (i.e., March, June, September and
December) until the completion of one (1) full trading day following the investor update. In addition, the General Counsel, Chief Financial
Officer, or their designees may put in place issue- specific additional blackout periods on a case-by- case basis. If you are named to an issue-
specific blackout list, you will be notified by the General Counsel, Chief Financial Officer or their designees and shall remain subject to the
prohibition against trading until such time that the General Counsel, Chief Financial Officer or their designees notifies you that the blackout has
been lifted.
5.3 Pre-Clearance
Each director and “officer” (as defined in Section 16 of the Securities Exchange Act of 1934, as amended) must contact the General Counsel,
Chief Financial Officer or their designees at least forty-eight (48) hours prior to making any transaction (e.g., purchase, sale or gift) involving the
Company’s securities to obtain pre-clearance of such transaction. The brokers employed by a director or such officer may be required to sign an
acknowledgement of the foregoing. If clearance to engage in a trade is received, you must complete the proposed trade within two (2) trading
days or make a new trading request.
If the Company is in a blackout period, or you are otherwise in possession of material nonpublic information, you may be asked to postpone your
transaction until the blackout period is lifted or you otherwise receive permission to trade from the General Counsel, Chief Financial Officer or
their designees. The General Counsel and Chief Financial Officer are under no obligation to approve a transaction submitted for pre-clearance. If
you seek pre- clearance and permission to engage in the transaction is denied, then you should refrain from initiating any transaction in Company
securities, and should not inform any other person of the restriction.
Any transaction in Company securities by a director or “officer” (as defined in Section 16 of the Securities Exchange Act of 1934, as amended)
must be reported to the General Counsel or hisor her designee on the same day in which the transaction occurs. Compliance with this provision is
imperative given the requirement of Section 16 of the Securities Exchange Act of 1934, as amended, that directors and “officers”(as defined in
Section 16 of the Securities Exchange Act of 1934, as amended) generally must report changes in ownership of Company securities to the
Securities and Exchange Commission within two (2) business days. Each report should include the date of the transaction, quantity of securities,
price and broker-dealer through which the transaction was effected, in addition to any other information requested by the Company from time to
time.
5.4 Post-Termination Transactions
This policy continues to apply to transactions in Company securities even after an individual has terminated employment or other services to the
Company or a subsidiary as follows:
•
If the individual is aware of material nonpublic information when the employment or service relationship terminates, he or she shall
pre-clear any transaction (purchase or sale) of Company securities in the market with the General Counsel, Chief Financial Officer or
their designee until the earlier of (i) six (6) months following termination and (ii) the date that the information has become public; and
•
If the individual is subject to a blackout when the employment or service relationship terminates, he or she may continue to be subject
to such blackout until notified by the General Counsel, Chief Financial Officer, or their designee.
6.0 Stock Options, Restricted Stock Units and Employee Stock Purchase Plan Shares
The restrictions set forth herein do not apply to exercises of stock options in which an employee purchases shares of Cyclerion stock pursuant to
such stock options; such option exercises do not require prior approval. Any sales of shares purchased pursuant to stock options, however, are
subject to the restrictions set forth in this policy. In particular, some “cashless exercises” include both exercises of options and an immediate sale
of stock acquired via the option exercise; therefore, “cashless exercises” which include a sale of securities are subject to the restrictions set forth
herein.
Similarly, the restrictions set forth herein do not apply to the issuance of shares from the
6
Company to an employee upon the vesting of restricted stock units (“RSUs”) or similar rewards. Any sales of such shares, however, are subject
to the restrictions set forth in this policy. This includes sales of shares by the Company to satisfy the employee’s tax obligations in connection
with the vesting of RSUs; however, if you have properly entered into a Company-administered planned sale program (as described below in
more detail under the heading “Planned Sales Programs”) for such sales, such sales will comply with this policy.
Finally, although purchases of Cyclerion stock pursuant to the Cyclerion Employee Stock Purchase Plan are not subject to the restrictions set
forth herein, all sales of shares purchased pursuant to such plan are subject to all the restrictions set forth in this policy.
7.0 Planned Sale Programs
The above limitations do not apply to stock transactions done in accordance with what are commonly known as a “10b5-1 Plan” or “Planned
Sale Program”, which were established (or amended as the case may be) at a time when you were not aware of material nonpublic information
and in compliance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. A 10b5-1 Plan is a document that sets forth a plan to
sell securities in the future without any further investment decision(s) at the time of the actual trade consummation. Any 10b5-1 Plan must
provide for a waiting period of at least fourteen (14) days prior to the commencement of trading thereunder, and should be reviewed and cleared
by the General Counsel, Chief Financial Officer or their designees (including any amendments thereto) in advance of finalizing the 10b-5-1 Plan.
8.0 Special and Prohibited Transactions
There is a heightened legal risk and the appearance of improper or inappropriate conduct if directors or “officers” (as defined in Section 16 of the
Securities Exchange Act of 1934, as amended) engage in certain types of transactions. Therefore, these individuals may not engage in any of the
following transactions:
•
Short sales. Short sales of Company securities (i.e., the sale of a security that the seller does not own) may evidence an expectation on the part of
the seller that the securities will decline in value, and therefore have the potential to signal to the market that the seller lacks confidence in the
Company’s prospects. In addition, short sales may reduce a seller’s incentive to seek to improve the Company’s performance. For these reasons,
short sales of Company securities are prohibited.
•
Publicly-traded options. Given the relatively short term nature of publicly-traded options, transactions in options may create the appearance that
a director or officer is trading based on material nonpublic information and focus such person’s attention on short-term performance at the
expense of the Company’s long-term objectives. Accordingly, transactions in put options, call options or other derivative securities, on an
exchange or in any other organized market, are prohibited by this policy.
•
Hedging transactions. Hedging or monetization transactions can be accomplished through a number of possible mechanisms, including through
the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds. Such hedging transactions may
permit a director or officer to continue to own Company securities obtained through employee equity incentive plans or otherwise, but without
the full risks and rewards of ownership. When that occurs, the director or officer may no longer have the same objectives as the Company’s other
shareholders, and therefore they are prohibited from engaging in any such transactions.
•
Margin Accounts and Pledges. Securities held in a margin account or pledged as collateral for a loan may be sold without consent by the broker
if an individual fails to meet a margin call or by the lender in foreclosure if an individual defaults on the loan. Because a margin or foreclosure
sale that occurs when an individual is aware of material nonpublic information or otherwise is not permitted to trade in Company securities
would violate this policy, directors and “officers” (as defined in Section 16 of the Securities Exchange Act of 1934, as amended) are prohibited
from holding Company securities in a margin account or pledging Company securities as collateral for a loan. An exception may be granted
where an individual wishes to pledge Company securities as collateral for a loan and clearly demonstrates the financial capacity to repay the loan
without resorting to the pledged securities. If any such individual wishes to pledge Company securities as collateral for a loan, he or she must
submit a request to the General Counsel or his or her designee prior to the proposed execution of documents evidencing the proposed pledge.
9.0 Consequences of Violating this Policy
9.1 The Law
7
U.S. laws impose heavy penalties on those who, in violation of law, either buy or sell securities while aware of material nonpublic information or
pass the material nonpublic information along to others who use it to buy or sell securities. Potential punishments include a range of civil and
criminal penalties, as well as the potential for imprisonment.
9.2 Company Sanctions
In view of the seriousness of this matter, the Company will discipline any person who violates this policy by any appropriate means, including
dismissal for cause. Any of these consequences and even an investigation that does not result in prosecution, can tarnish your reputation, and
irreparably damage you and the Company.
10.0 Company Assistance & Waivers
Anyone with questions about specific transactions may obtain additional guidance from the General Counsel or Chief Financial Officer. Please
contact the General Counsel or Chief Financial Officer if you believe that a waiver under a provision of this policy is warranted.
The General Counsel or Chief Financial Officer must obtain the approval of the Chief Executive Officer to grant a waiver hereunder in certain
limited circumstances. In addition, a majority of the independent directors or the Audit Committee of the Board of Directors must approve a
waiver for any director.
11.0 Revision History
Revision Number
Effective Date
Supersedes
Reason for Revision
12.0 Attachments
None
13.0 Sponsorship and Policy Management
General Counsel and Chief Financial Officer
Exhibit 21.1
List of Registrant’s Subsidiaries
Cyclerion Securities Corporation, incorporated in Massachusetts, a wholly owned subsidiary.
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements:
(1)
Registration Statement (Form S-3 No. 333-257145) of Cyclerion Therapeutics, Inc. and the related Prospectus,
(2)
Registration Statement (Form S-3 No. 333-284690) of Cyclerion Therapeutics, Inc. and the related Prospectus,
(3)
Registration Statement (Form S-3 No. 333-242334) of Cyclerion Therapeutics, Inc. and the related Prospectus,
(4)
Registration Statement (Form S-8 No. 333-248957) pertaining to 2019 Equity Incentive Plan, 2019 Employee Stock Purchase of Cyclerion
Therapeutics, Inc.,
(5)
Registration Statement (Form S-8 No. 333-258316) pertaining to 2019 Equity Incentive Plan, 2019 Employee Stock Purchase of Cyclerion
Therapeutics, Inc.,
(6)
Registration Statement (Form S-8 No. 333-230615) pertaining to 2019 Equity Incentive Plan, 2019 Employee Stock Purchase Plan, Amended
and Restated 2010 Employee, Director and Consultant Equity Incentive Plan, and Amended and Restated 2005 Stock Incentive Plan of
Cyclerion Therapeutics, Inc.;
(7)
Registration Statement (Form S-8 No. 333-266739) pertaining to 2019 Equity Incentive Plan, 2019 Employee Stock Purchase of Cyclerion
Therapeutics, Inc.,
(8)
Registration Statement (Form S-8 No. 333-273530) pertaining to 2019 Equity Incentive Plan, 2019 Employee Stock Purchase of Cyclerion
Therapeutics, Inc.
of our report dated March 4, 2025, with respect to the consolidated financial statements of Cyclerion Therapeutics, Inc. included in this Annual Report
(Form 10-K) for the year ended December 31, 2024.
/s/ Ernst & Young LLP
Boston, Massachusetts
March 4, 2025
Exhibit 31.1
CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Regina Graul, certify that:
1. I have reviewed this annual report on Form 10-K of Cyclerion Therapeutics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: March 4, 2025
By:
/s/ Regina Graul
Name:
Regina Graul
Title:
President and Chief Executive Officer (Principal Executive
Officer)
Exhibit 31.2
CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Rhonda Chicko, certify that:
1. I have reviewed this annual report on Form 10-K of Cyclerion Therapeutics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for
the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: March 4, 2025
By:
/s/ Rhonda Chicko
Name:
Rhonda Chicko
Title:
Chief Financial Officer (Principal Financial and Accounting
Officer)
Exhibit 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Regina Graul, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my
knowledge, the Annual Report on Form 10-K of Cyclerion Therapeutics, Inc. for the period ended December 31, 2024 fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such Form 10-K fairly presents, in all material respects,
the financial condition and results of operations of Cyclerion Therapeutics, Inc.
Date: March 4, 2025
By:
/s/ Regina Graul
Name:
Regina Graul
Title:
President and Chief Executive Officer (Principal Executive
Officer)
Exhibit 32.2
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Rhonda Chicko, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my
knowledge, the Annual Report on Form 10-K of Cyclerion Therapeutics, Inc. for the period ended December 31, 2024 fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such Form 10-K fairly presents, in all material respects,
the financial condition and results of operations of Cyclerion Therapeutics, Inc.
Date: March 4, 2025
By:
/s/ Rhonda Chicko
Name:
Rhonda Chicko
Title:
Chief Financial Officer (Principal Financial and Accounting
Officer)