UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
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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
(Exact Name of Registrant as Specified in its Charter)
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(
Registrant’s Telephone Number, Including Area Code
Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
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.
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Large accelerated filer ☐ |
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Accelerated filer ☐ |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of July 27, 2021, the registrant had
CYCLERION PHARMACEUTICALS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2021
TABLE OF CONTENTS
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Condensed Consolidated Balance Sheets as of June 30, 2021, and December 31, 2020 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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34 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. All statements in this report, other than statements of historical facts, including statements about future events, financing plans, financial position, business strategy, budgets, projected costs, plans and objectives of management for future operations, are forward-looking statements that involve certain risks and uncertainties. Use of the words “may,” “might,” “will,” “would,” “could,” “should,” “believes,” “estimates,” “projects,” “potential,” “expects,” “plans,” “seeks,” “intends,” “evaluates,” “pursues,” “anticipates,” “continues,” “designs,” “impacts,” “affects,” “forecasts,” “target,” “outlook,” “initiative,” “objective,” “designed,” “priorities,” “goal” or the negative of those words or other similar expressions may identify forward-looking statements that represent our current judgment about possible future events, but the absence of these words does not necessarily mean that a statement is not forward-looking.
Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national, or global political, economic, business, competitive, market and regulatory conditions and the following:
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the timing, investment and associated activities involved in developing, obtaining regulatory approval for, launching and commercializing our product candidates, including CY6463; |
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the coronavirus (“COVID-19”) pandemic affecting our clinical trials and other operating activities; |
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our relationships with third parties, collaborators and our employees; |
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our ability to execute our strategic priorities; |
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our ability to finance our operations and business initiatives; |
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the success of collaboration or license arrangements of our product candidates; |
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whether the praliciguat out-license will result in the creation of any therapies for the treatment of patients with kidney disease; |
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the uncertain utility, development, promise, and commercialization of praliciguat; |
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whether any development, regulatory, and commercialization milestones or royalty payments provided for in the agreement with Akebia (as defined below) will be achieved; |
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the impact on our business of workforce and expense reduction initiatives; |
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our plans with respect to the development, manufacture or sale of our product candidates and the associated timing thereof, including the design and results of pre-clinical and clinical studies; |
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the safety profile and related adverse events of our product candidates; |
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the efficacy and perceived therapeutic benefits of our product candidates, their potential indications and their market potential; |
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U.S. and non-U.S. regulatory requirements for our product candidates, including any post-approval development and regulatory requirements, and the ability of our product candidates to meet such requirements; |
3
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our ability to attract and retain employees needed to execute our business plans and strategies and our ability to manage the impact of any loss of key employees; |
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our ability to obtain and maintain intellectual property protection for our product candidates and the strength thereof; |
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our future financial performance, revenues, expense levels, payments, cash flows, profitability, tax obligations, capital raising and liquidity sources, real estate needs and concentration of voting control, as well as the timing and drivers thereof, and internal control over financial reporting; |
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our ability to compete with other companies that are or may be developing or selling products that are competitive with our product candidates; |
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the impact of government regulation in the life sciences industry, particularly with respect to healthcare reform; |
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potential indemnification liabilities we may owe to Ironwood after the Separation (as defined below); and |
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trends and challenges in the markets for our potential products. |
See the “Risk Factors” section in Item 1A of our annual report on Form 10-K for the fiscal year ended December 31, 2020, and elsewhere in this Quarterly Report on Form 10-Q for a further description of these and other factors. We caution you that the risks, uncertainties, and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits, or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. There can be no assurance that (i) we have correctly measured or identified all of the factors affecting our business or the extent of these factors’ likely impact, (ii) the available information with respect to these factors on which such analysis is based is complete or accurate, (iii) such analysis is correct or (iv) our strategy, which is based in part on this analysis, will be successful. All forward-looking statements in this report apply only as of the date of this report or as of the date they were made and, except as required by applicable law, we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.
4
Cyclerion Therapeutics, Inc.
Condensed Consolidated Balance Sheets
(In thousands except share and per share data)
(Unaudited)
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June 30, 2021 |
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December 31, 2020 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Related party accounts receivable |
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— |
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Prepaid expenses |
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Other current assets |
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Total current assets |
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Restricted cash, net of current portion |
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— |
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Property and equipment, net |
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Operating lease right-of-use asset |
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— |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Related party accounts payable |
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— |
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Accrued research and development costs |
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Accrued expenses and other current liabilities |
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Short-term note payable |
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Current portion of operating lease liabilities |
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— |
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Total current liabilities |
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Operating lease liabilities, net of current portion |
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— |
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Commitments and contingencies |
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Stockholders' equity |
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Common stock, no par value, |
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— |
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— |
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Accumulated deficit |
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Paid-in capital |
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Accumulated other comprehensive loss |
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( |
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( |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Cyclerion Therapeutics, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands except per share data)
(Unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2021 |
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2020 |
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2021 |
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2020 |
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Revenues: |
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Revenue from license agreement |
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$ |
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$ |
— |
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$ |
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$ |
— |
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Revenue from development agreement |
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— |
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— |
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— |
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Revenue from related party |
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— |
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$ |
— |
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$ |
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Total revenues |
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Cost and expenses: |
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Research and development |
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General and administrative |
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(Gain) / loss on lease modification and termination |
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— |
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( |
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Total cost and expenses |
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Loss from operations |
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( |
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( |
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( |
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( |
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Interest and other income, net |
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( |
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( |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss per share: |
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Basic and diluted net loss per share |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted average shares used in calculating: |
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Basic and diluted net loss per share |
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Other comprehensive loss: |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Other comprehensive loss: |
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Foreign currency translation adjustment (loss) gain |
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( |
) |
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( |
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Comprehensive loss |
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$ |
( |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Cyclerion Therapeutics, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(In thousands except share data)
(Unaudited)
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Common Stock |
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Paid-in |
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Accumulated |
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Accumulated other comprehensive |
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Total Stockholders’ |
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Shares |
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Amount |
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capital |
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deficit |
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loss |
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equity (deficit) |
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Balance at December 31, 2019 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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$ |
( |
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Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan |
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— |
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— |
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$ |
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Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan |
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— |
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— |
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— |
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$ |
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Foreign currency translation adjustment |
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$ |
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Balance at March 31, 2020 |
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— |
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( |
) |
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( |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan |
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— |
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— |
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— |
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Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan |
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— |
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— |
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— |
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— |
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Foreign currency translation adjustment |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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Balance at June 30, 2020 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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7
Cyclerion Therapeutics, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(In thousands except share data)
(Unaudited)
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Common Stock |
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Paid-in |
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Accumulated |
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Accumulated other comprehensive |
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Total Stockholders’ |
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Shares |
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Amount |
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capital |
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deficit |
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loss |
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equity (deficit) |
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Balance at December 31, 2020 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan |
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— |
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— |
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— |
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Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan |
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— |
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— |
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— |
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— |
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Share‑based compensation expense related to issuance of stock options to non-employees |
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— |
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— |
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— |
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— |
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Foreign currency translation adjustment |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at March 31, 2021 |
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— |
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( |
) |
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( |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Issuance of common stock - June 2021 equity private placement and ATM |
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— |
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— |
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— |
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Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan |
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— |
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— |
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— |
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Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan |
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— |
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— |
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— |
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— |
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Share‑based compensation expense related to issuance of stock options and RSUs to non-employees |
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— |
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— |
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— |
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— |
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Foreign currency translation adjustment |
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— |
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— |
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— |
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— |
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Balance at June 30, 2021 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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|
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
Cyclerion Therapeutics, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
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Six Months Ended June 30, |
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2021 |
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2020 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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Adjustments to reconcile net loss to net cash (used in) operating activities: |
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Depreciation and amortization |
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Net loss on disposal of property and equipment |
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|
|
|
|
|
|
|
(Gain) / loss on lease modification and termination |
|
|
|
|
|
|
( |
) |
|
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Related party accounts receivable |
|
|
|
|
|
|
|
|
|
Prepaid expenses |
|
|
|
|
|
|
( |
) |
|
Other current assets |
|
|
( |
) |
|
|
|
|
|
Operating lease assets |
|
|
|
|
|
|
( |
) |
|
Other assets |
|
|
|
|
|
|
( |
) |
|
Accounts payable |
|
|
|
|
|
|
( |
) |
|
Related party accounts payable |
|
|
( |
) |
|
|
|
|
|
Accrued research and development costs |
|
|
|
|
|
|
( |
) |
|
Operating lease liabilities |
|
|
( |
) |
|
|
( |
) |
|
Accrued expenses and other current liabilities |
|
|
( |
) |
|
|
( |
) |
|
Net cash (used in) operating activities |
|
|
( |
) |
|
|
( |
) |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
— |
|
|
|
( |
) |
|
Proceeds from sale of property and equipment |
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
|
|
|
|
( |
) |
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Proceeds from June 2021 equity private placement and ATM |
|
|
|
|
|
|
— |
|
|
Proceeds from exercises of stock options and ESPP |
|
|
|
|
|
|
|
|
|
Proceeds from short-term note payable |
|
|
— |
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
|
|
|
|
( |
) |
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
|
|
|
|
( |
) |
|
Cash, cash equivalents and restricted cash, beginning of period |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash, end of period |
|
$ |
|
|
|
$ |
|
|
|
Supplemental cash flow disclosure: |
|
|
|
|
|
|
|
|
|
Cash paid for initial direct costs of lease modification |
|
$ |
— |
|
|
$ |
|
|
|
Non-cash investing activities |
|
|
|
|
|
|
|
|
|
Fixed asset purchases in accounts payable and accrued expenses |
|
$ |
— |
|
|
$ |
|
|
|
Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
Restricted cash |
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents and restricted cash |
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
9
Cyclerion Therapeutics, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
1. Nature of Business
Nature of Operations
Cyclerion Therapeutics, Inc. (“Cyclerion”, the “Company” or “we”) is a clinical-stage biopharmaceutical company on a mission to develop treatments that restore cognitive function. Our lead asset, CY6463 (previously known as, IW-6463), is a pioneering, central nervous system (“CNS”)-penetrant, soluble guanylate cyclase (sGC) stimulator that is currently in clinical development for Alzheimer’s disease with vascular pathology (ADv), and Mitochondrial Encephalomyopathy, Lactic Acidosis and Stroke-like episodes (MELAS), and cognitive impairment associated with schizophrenia (CIAS). sGC stimulators are small molecules that act synergistically with nitric oxide (NO) as positive allosteric modulators of sGC to boost production of cyclic guanosine monophosphate (cGMP). cGMP is a key second messenger that, when produced by sGC, regulates diverse and critical biological functions in the CNS including neuronal function, neuroinflammation, cellular bioenergetics, and vascular function.
Cyclerion GmbH, a wholly owned subsidiary, was incorporated in Zug, Switzerland on May 3, 2019. Cyclerion GmbH is an operational entity with
Cyclerion Securities Corporation, a wholly owned subsidiary, was incorporated in Massachusetts on November 15, 2019, and was granted securities corporation status in Massachusetts for the 2019 tax year. Cyclerion Securities Corporation has
Company Overview
The Company’s mission is to develop treatments that restore cognitive function. Its priorities are advancing its ongoing CY6463 clinical programs and next generation compound, CY3018.
CNS assets. CY6463 is an orally administered CNS-penetrant sGC stimulator that is being developed as a symptomatic and potentially disease modifying therapy for serious CNS diseases. Nitric oxide sGC-cGMP is a fundamental CNS signaling network, but it has not yet been leveraged for its full therapeutic potential. CY6463 enhances the brain’s natural ability to produce cGMP, an important second messenger in the CNS, by stimulating sGC, a key node in the NO-sGC-cGMP pathway. This pathway is critical to basic CNS functions and deficient NO-sGC-cGMP signaling is believed to play an important role in the pathogenesis of neurodegenerative diseases. Agents that stimulate sGC to produce cGMP may compensate for deficient NO signaling.
On January 13, 2020, we announced positive results from our Phase 1 first-in-human study that provided the foundation for continued development of CY6463. The Phase 1 healthy participant study results indicate that CY6463 was well tolerated. Pharmacokinetic (PK) data, obtained from both blood and cerebral spinal fluid (CSF), support once-daily dosing, with or without food, and demonstrated CY6463 penetration of the blood-brain-barrier with CSF concentrations expected to be pharmacologically active.
On October 14, 2020, we announced positive topline results from our CY6463 Phase 1 translational pharmacology study in healthy elderly participants. Treatment with CY6463 for 15-days in this 24-subject study confirmed and extended results seen in the earlier first-in-human Phase 1 study: once daily oral treatment demonstrated blood-brain-barrier penetration with expected CNS exposure and target engagement. Results also showed significant improvements in neurophysiological and objective performance measures as well as in inflammatory biomarkers associated with aging and neurodegenerative diseases. CY6463 was shown to be safe and generally well tolerated. Significant effects on cerebral blood flow and markers of bioenergetics were not observed in this study of healthy elderly participants. We believe that these results, together with nonclinical data, support continued development of CY6463 as a potential new medicine for serious CNS diseases.
10
Our next generation CNS asset, CY3018, is a differentiated CNS-penetrant sGC stimulator with greater CSF-to-plasma exposure relative to CY6463. CY3018 is intended to expand the potential of sGC stimulation for the treatment of disorders of the CNS.
Non-CNS assets. We have other assets that are outside of our current strategic focus. These non-core assets are not being internally developed at this time and with the exception of praliciguat, are available for licensing to a third-party partner. Praliciguat is an orally administered, once-daily systemic sGC stimulator. On June 3, 2021, we 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 the pharmaceutical compound praliciguat and other related products and forms thereof enumerated in such agreement. Olinciguat is an orally administered, once-daily, vascular sGC stimulator that was evaluated in a Phase 2 study of participants with sickle cell disease. We released topline results from this study in October 2020.
The Separation
On April 1, 2019, Ironwood Pharmaceuticals, Inc. (“Ironwood”) completed the separation of its sGC business, and certain other assets and liabilities, into a separate, independent publicly traded company by way of a pro-rata distribution of all of the outstanding shares of common stock of Cyclerion Therapeutics, Inc. through a dividend distribution of
June 2021 Equity Private Placement
On June 3, 2021, the Company entered into a Common Stock Purchase Agreement (the “June 2021 Equity Private Placement”) for the private placement of
At-the-Market Offering
On July 24, 2020, the Company filed a Registration Statement on Form S-3 (the “Shelf”) with the Securities and Exchange Commission (the “SEC”) in relation to the registration of common stock, preferred stock, debt securities, warrants and units of any combination thereof for an aggregate initial offering price not to exceed $
11
Basis of Presentation
The condensed consolidated financial statements and the related disclosures are unaudited and have been prepared in accordance with accounting principles generally accepted in the U.S. Additionally, certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission on February 25, 2021.
In the opinion of management, the unaudited interim condensed 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 interim periods presented. The results of operations for the three and six months ended June 30, 2021, and 2020 are not necessarily indicative of the results that may be expected for the full year or any other subsequent interim period.
The condensed consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries, Cyclerion GmbH, and Cyclerion Securities Corporation. All significant intercompany accounts and transactions have been eliminated in the preparation of the accompanying condensed consolidated financial statements.
Going Concern
At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company’s evaluation entails analyzing prospective operating budgets and forecasts for expectations of the Company’s cash needs and comparing those needs to the current cash and cash equivalent balances. The Company is required to make certain additional disclosures if it concludes substantial doubt exists and it is not alleviated by the Company’s plans or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern.
The Company has experienced negative operating cash flows for all historical periods presented and the Company expects these losses to continue into the foreseeable future as the Company continues the development and clinical testing of its product candidate CY6463, CY3018 and its discovery research programs. Through June 30, 2021, the Company had raised an aggregate of $
After considering the Company’s current research and development plans and the timing expectations related to the progress of its programs, and after considering its existing cash and cash equivalents as of June 30, 2021, the Company did not identify conditions or events that would raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date these financial statements were issued.
2. Summary of Significant Accounting Policies
The accounting policies of the Company are set forth in Note 2. Summary of Significant Accounting Policies to the consolidated financial statements contained in the Company’s 2020 annual report on Form 10-K. The Company includes herein certain updates to those policies.
Use of Estimates
The preparation of consolidated financial statements in accordance with U.S. GAAP requires the Company’s management to make estimates and judgments that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated 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, impairment of long-lived assets, valuation procedures for right-of-use 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
12
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.
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. Except as discussed elsewhere in the notes to the consolidated financial statements, the Company did not adopt any new accounting pronouncements during the six months ended June 30, 2021 that had a material effect on its consolidated financial statements.
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 will become effective for the Company for fiscal years beginning after December 15, 2022, and early adoption is permitted. The Company is currently evaluating the impact that ASU 2016-13 will have on its financial statements and related disclosures.
In May 2021 the FASB issued Accounting Standards Update No. 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, a consensus of the Emerging Issues Task Force (EITF) , which amends the FASB Accounting Standards Codification (ASC or the “Codification”) to provide explicit guidance, and, thus, reduce diversity in practice, on accounting by issuers for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after the modification or exchange. This amendment provides that for an entity that presents earnings per share (EPS) in accordance with Topic 260, the effects of a modification or an exchange of a freestanding equity-classified written call option that is recognized as a dividend should be an adjustment to net income (or net loss) in the basic EPS calculation. The amended guidance becomes mandatorily effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, and should be applied prospectively to modifications or exchanges occurring on or after the effective date. The Company is currently evaluating the impact that ASU 2021-04 will have on its consolidated financial statements and related disclosures.
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. Related Party Transactions
Development Agreement with Ironwood
As part of the Separation from Ironwood, the Company entered into a Development Agreement with Ironwood.
Under the Development Agreement, the Company provided certain research and development services to Ironwood at mutually agreed upon rates and the amounts earned are recorded as revenue from related party for the three and six months ended June 30, 2020. Such research and development activities were governed by a joint steering committee composed of representatives of both Ironwood and the Company. Ironwood and the Company have agreed not to renew the Development Agreement beyond the end of its initial term on March 31, 2021. These transactions under the Development Agreement were considered related party transactions due to Mark Currie’s role as President of the Company through December 31, 2020, and board member of Ironwood. In January 2021, Mark Currie’s role transitioned from President of the Company to a senior advisor on a consulting basis. Therefore, effective January 2021, transactions under the Development Agreement are no longer accounted for as related party transactions. The Company recorded approximately $
13
4. Fair Value of Financial Instruments
The Company’s cash equivalents are generally classified within Level 1 of the fair value hierarchy. The following tables 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 June 30, 2021 and December 31, 2020 (in thousands):
|
|
|
Fair Value Measurements as of June 30, 2021 Using: |
|
|||||||||||||
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Cash equivalents |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
|
|
Fair Value Measurements as of December 31, 2020 Using: |
|
|||||||||||||
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Cash equivalents |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
During the six months ended June 30, 2021, and 2020, 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 prepaid expenses and other current assets, restricted cash, accounts payable, and accrued expenses approximate their fair value due to the short-term nature of these amounts.
5. Property and Equipment
Property and equipment, net consisted of the following (in thousands):
|
|
|
June 30, |
|
|
December 31, |
|
||
|
|
|
2021 |
|
|
2020 |
|
||
|
Software |
|
$ |
|
|
|
$ |
|
|
|
Computer and office equipment |
|
|
|
|
|
|
|
|
|
Leasehold improvements |
|
|
— |
|
|
|
|
|
|
Property and equipment, gross |
|
|
|
|
|
|
|
|
|
Less: accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
Property and equipment, net |
|
$ |
|
|
|
$ |
|
|
As of June 30, 2021, and December 31, 2020, the Company’s property and equipment was primarily located in Cambridge, Massachusetts.
Depreciation and amortization expense of the Company’s property and equipment was approximately $
During the three and six months ended June 30, 2021, the Company wrote off $
14
6. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
|
June 30, |
|
|
December 31, |
|
||
|
|
|
2021 |
|
|
2020 |
|
||
|
Accrued incentive compensation |
|
$ |
|
|
|
$ |
|
|
|
Salaries |
|
|
|
|
|
|
|
|
|
Accrued vacation |
|
|
|
|
|
|
|
|
|
Professional fees |
|
|
|
|
|
|
|
|
|
Accrued severance and benefit costs |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities |
|
$ |
|
|
|
$ |
|
|
7. 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 June 30, 2021 and December 31, 2020.
8. Leases
On April 1, 2019, the Company entered into the Head Lease, a direct operating lease for its former headquarters located at 301 Binney Street, Cambridge, MA originally consisting of approximately
On February 28, 2020, the Company amended the Head Lease. The Lease Amendment partially terminated the Company’s rights and obligations with respect to an approximately
15
The Lease Amendment was determined to be a lease modification that qualified as a change of accounting on the existing lease and not a separate contract. As such, the Right-of-Use (“ROU”) assets and operating lease liabilities were remeasured using an incremental borrowing rate at the date of modification of
On September 15, 2020, the Company entered into the Second Lease Amendment to its Head Lease. The Second Lease Amendment partially terminated the Company’s rights and obligations with respect to approximately
The Second Lease Amendment was determined to be a lease modification that qualified as a change of accounting on the existing lease and not a separate contract. As such, the ROU assets and operating lease liabilities were remeasured using an incremental borrowing rate at the date of modification of
On April 30, 2021, the Company entered into a Termination Agreement for its Head Lease as initially amended on February 28, 2020, and further amended on September 15, 2020. Pursuant to the Termination Agreement, the Company surrendered the leased space of approximately
The Company had an operating lease ROU asset of approximately $
Lease cost is recognized on a straight-line basis over the lease term. For the three and six months ended June 30, 2021, the Company recognized a total of approximately $
16
For the three and six months ended June 30, 2020, the Company recognized a total of approximately $
Supplemental cash flow information related to leases for the six months ended June 30, 2021 is as follows:
|
|
|
Six Months Ended June 30, |
|
||||
|
|
|
2021 |
|
2020 |
|
||
|
Decrease in right-of-use assets related to lease modifications and termination |
|
$ |
|
|
$ |
|
|
|
Decrease in operating lease liabilities due to lease modifications and termination |
|
$ |
|
|
$ |
|
|
|
Cash paid for amounts included in the measurement of lease liabilities (in thousands) |
|
$ |
|
|
$ |
|
|
|
Weighted-average remaining lease term of operating leases (in years) |
|
|
— |
|
|
|
|
|
Weighted-average discount rate of operating leases |
|
|
— |
|
|
|
% |
On October 18, 2019, the Company entered into an agreement with a third party to sublease
For the six months ended June 30, 2020, gross sublease income of $
On September 15, 2020, concurrent with execution of the Second Lease Amendment, the Company entered into the Sublease Termination Agreement to terminate its sublease of
The Company determined that the Sublease Termination Agreement constitutes 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. The Company estimated the fair value of the rooms and services to be approximately $
The Company determined that the licensed rooms represent a lease under ASC 842. Once the Company obtains control of the rooms, the prepaid rooms balance will be reclassified from other assets to a ROU asset, and the related lease expense will be recorded on a straight-line basis over the lease term. The Company determined that the licensed services represent a non-lease component, which will be recognized separately from the lease component for this asset class. The expense related to the licensed services will be recognized on a straight-line
17
basis over the period the services are received. Both the lease expense and services expense will be recognized as a component of research and development costs in the consolidated statements of operations and comprehensive loss.
9. 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 and restricted stock units (“RSUs”).
Cyclerion also mirrored two of Ironwood’s existing plans, the Amended and Restated 2005 Stock Incentive Plan (“2005 Equity Plan”) and the Amended and Restated 2010 Employee, Director and Consultant Equity Incentive Plan (“2010 Equity Plan). These mirror plans were adopted to facilitate the exchange of Ironwood equity awards for Cyclerion equity awards upon the Separation as part of the equity conversion. As a result of the Separation and in accordance with the EMA, employees of both companies retained their existing Ironwood vested options and received a pro-rata share of Cyclerion options, regardless of which company employed them post-Separation. For employees that were ultimately employed by Cyclerion, unvested Ironwood options and RSUs were converted to unvested Cyclerion options and RSUs.
The conversion of equity awards resulting from the Separation impacted approximately
The following table provides share-based compensation reflected in the Company’s condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2021, and 2020 (in thousands):
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Research and development |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
A summary of stock option activity for the six months ended June 30, 2021, is as follows:
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
Average |
|
|||
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Intrinsic |
|
|||
|
|
|
Number |
|
|
Exercise |
|
|
Contractual |
|
|
Value (in |
|
||||
|
|
|
of Options |
|
|
Price |
|
|
Term (Years) |
|
|
thousands) |
|
||||
|
Outstanding as of December 31, 2020 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled or forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of June 30, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
Exercisable at June 30, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
18
As of June 30, 2021, the unrecognized share-based compensation expense, net of estimated forfeitures, related to all unvested time-based stock options held by the Company’s employees is $
A summary of RSU activity for the six months ended June 30, 2021 is as follows:
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
Number |
|
|
Grant Date |
|
||
|
|
|
of Shares |
|
|
Fair Value |
|
||
|
Unvested as of December 31, 2020 |
|
|
|
|
|
$ |
|
|
|
Vested |
|
|
( |
) |
|
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
|
Unvested as of June 30, 2021 |
|
|
|
|
|
$ |
|
|
As of June 30, 2021, the unrecognized share-based compensation expense, net of estimated forfeitures, related to all unvested restricted stock units by the Company’s employees is
The Company has granted to certain employees performance-based options to purchase shares of common stock. These options are subject to performance-based milestone vesting. During the three and six months ended June 30, 2021, and 2020 there were
The Company also has granted to certain employees stock options containing market conditions that vest upon the achievement of specified price targets of the Company’s share price for a period through December 31, 2024. Vesting is measured based upon the average closing price of the Company’s share price for any
10. Loss per share
Basic and diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period as follows:
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss (in thousands) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in calculating net loss per share — basic and diluted (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share — basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
19
For both the three and six months ended June 30, 2021 there were
For the three months ended June 30, 2020,
11. Defined Contribution Plan
Subsequent to the Separation, Cyclerion adopted a defined contribution 401(k) Savings Plan similar to the plan in place at Ironwood. The plan assets under the Ironwood defined contribution 401(k) Savings Plan were transferred to the Cyclerion plan.
Subject to certain IRS limits, eligible employees may elect to contribute from
Included in compensation expense is a de minimis amount and approximately $
12. Workforce Reduction
2019 Workforce Reduction
On October 30, 2019, the Company began a reduction of its current workforce by approximately
The workforce reduction was substantially completed during the year ended December 31, 2019, in which the Company recorded approximately $
The following table summarizes the accrued liabilities activity recorded in connection with the reduction in workforce for the six months ended June 30, 2020 (in thousands):
|
|
|
Amounts accrued at December 31, 2019 |
|
|
Charges |
|
|
Amount paid |
|
|
Adjustments |
|
|
Amounts accrued at June 30, 2020 |
|
|||||
|
October 2019 workforce reduction |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
2020 Workforce Reduction
On November 5, 2020, the Company began a reduction of its current workforce by approximately forty-eight (
The total one-time costs related to the 2020 Workforce Reduction were approximately $
20
The Company reduced its workforce by approximately thirty-one (
|
|
|
Amounts accrued at December 31, 2020 |
|
|
Charges |
|
|
Amount paid |
|
|
Adjustments |
|
|
Amounts accrued at June 30, 2021 |
|
|||||
|
2020 workforce reduction |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
— |
|
|
$ |
( |
) |
|
Total |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
— |
|
|
$ |
( |
) |
13. License Agreement
Akebia License Agreement
On June 3, 2021, the Company and Akebia entered into a License Agreement (the “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 License Agreement, Akebia will be responsible for all future research, development, regulatory, and commercialization activities for the Products.
Akebia paid a $
Pursuant to the License Agreement, the Company determined the License Agreement represents a service arrangement under the scope of ASC 606. Given the reversion of the rights under the 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 our 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 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 us.
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.
The Company did
21
14. Subsequent Events
The Company has evaluated all events and transactions that occurred after the balance sheet date through the date the condensed consolidated financial statements were issued and determined that there were no such events requiring recognition or disclosure in the condensed consolidated financial statements.
22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Information
The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and the corresponding notes included in this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and notes thereto included in our 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 Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements.
Overview
We are a clinical-stage biopharmaceutical company focused on discovering, developing and commercializing innovative medicines for people with serious diseases of the CNS, including cognitive and neurodegenerative disorders. Our current lead asset, CY6463, is a pioneering CNS-penetrant sGC stimulator in clinical development for MELAS, ADv, and CIAS. sGC stimulators are small molecules that act synergistically with nitric oxide on sGC to boost production of cyclic guanosine monophosphate, or cGMP. cGMP is a key second messenger that, when produced by sGC, regulates diverse and critical biological functions in the CNS including blood flow and vascular dynamics, inflammatory and fibrotic processes, bioenergetics, metabolism and neuronal function.
We operate in one reportable business segment—human therapeutics.
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 nonclinical study and clinical trial activities. All research and development expenses are charged to operations as incurred.
CNS assets. The core of our portfolio is CY6463, an orally administered CNS-penetrant sGC stimulator that is being developed as a symptomatic and potentially disease-modifying therapy for CNS diseases associated with cognitive impairment. Nitric oxide-sGC-cGMP is a fundamental CNS signaling network, but it has not yet been leveraged for its full therapeutic potential. CY6463 enhances the brain’s natural ability to produce cGMP, an important second messenger in the CNS, by stimulating sGC, a key node in the NO-sGC-cGMP pathway. This pathway is critical to basic CNS functions, and deficient NO-sGC-cGMP signaling is believed to play an important role in the pathogenesis of many CNS diseases. Agents that stimulate sGC to produce cGMP may compensate for deficient NO signaling.
In January 2020, we announced positive Phase 1 study results that provided the foundation for continued development of CY6463. The Phase 1 healthy participant study results indicate that CY6463 was well tolerated. Pharmacokinetic (PK) data, obtained from both blood and cerebral spinal fluid (CSF), support once-daily dosing with or without food and demonstrated CY6463 penetration of the blood-brain-barrier with CSF concentrations expected to be pharmacologically active.
In October 2020, we announced positive topline results from our CY6463 Phase 1 translational pharmacology study in healthy elderly participants. Treatment with CY6463 for 15 days in this 24-subject study confirmed and extended results seen in the earlier first-in-human Phase 1 study: once-daily oral treatment demonstrated blood-brain-barrier penetration with expected CNS exposure and target engagement. Results also showed significant improvements in neurophysiological and objective performance measures as well as in inflammatory biomarkers associated with aging and neurodegenerative diseases. CY6463 was safe and generally well tolerated in this study. Significant effects on cerebral blood flow and markers of bioenergetics were not observed in this study of healthy elderly participants. We believe that these results, together with nonclinical data, support continued development of CY6463 as a potential new medicine for serious CNS diseases.
23
We have initiated our CY6463 Phase 2a clinical trial in adult participants with MELAS. Study start-up activities are ongoing for our Phase 2a clinical trial in ADv, with enrollment expected to begin in mid-2021. The ADv study will be supported in part by a grant from the Alzheimer's Association’s Part the Cloud-Gates Partnership Grant Program, which provides Cyclerion with $2 million of funding over two years. Startup activities are ongoing for our Phase 1b clinical study in CIAS, with enrollment expected to begin in the second half of 2021.
Our next-generation CNS asset, CY3018, is a differentiated CNS-penetrant sGC with greater CSF-to-plasma exposure relative to CY6463 based on nonclinical studies. CY3018 is intended to expand the potential of sGC stimulation for the treatment of disorders of the CNS.
Non-CNS assets. We have other assets that are outside of our current strategic focus. These non-core assets are not being internally developed at this time and, with the exception of praliciguat are available for licensing to a third-party partner. 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 the pharmaceutical compound praliciguat and other related products and forms thereof enumerated in such agreement. Olinciguat is an orally administered, once-daily, vascular sGC stimulator that was evaluated in a Phase 2 study of participants with sickle cell disease. We released topline results from this study in October 2020.
The following table summarizes our research and development expenses, employee and facility related costs allocated to research and development expense, and discovery and pre-clinical phase programs, for the three and six months ended June 30, 2021, and 2020. The product pipeline expenses relate primarily to external costs associated with nonclinical studies and clinical trial costs, which are presented by development candidate.
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
|
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||
|
Product pipeline external costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CY6463 |
|
|
2,884 |
|
|
|
1,500 |
|
|
|
4,050 |
|
|
|
2,838 |
|
|
CY3018 |
|
|
606 |
|
|
|
— |
|
|
|
606 |
|
|
|
— |
|
|
Olinciguat |
|
|
74 |
|
|
|
1,635 |
|
|
|
240 |
|
|
|
4,261 |
|
|
Praliciguat |
|
|
54 |
|
|
|
79 |
|
|
|
(414 |
) |
|
|
215 |
|
|
Discovery research |
|
|
— |
|
|
|
189 |
|
|
|
700 |
|
|
|
202 |
|
|
Total product pipeline external costs |
|
|
3,618 |
|
|
|
3,403 |
|
|
|
5,182 |
|
|
|
7,516 |
|
|
Personnel and related internal costs |
|
|
2,488 |
|
|
|
6,738 |
|
|
|
6,312 |
|
|
|
14,474 |
|
|
Facilities and other |
|
|
5,948 |
|
|
|
3,653 |
|
|
|
8,652 |
|
|
|
8,629 |
|
|
Total research and development expenses |
|
$ |
12,054 |
|
|
$ |
13,794 |
|
|
$ |
20,146 |
|
|
$ |
30,619 |
|
Securing regulatory approvals for new drugs is a lengthy and costly process. Any failure by us to obtain, or any delay in obtaining, regulatory approvals would materially adversely affect our product 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. We invest carefully in our pipeline, and the commitment of funding for each subsequent stage of our development programs is dependent upon the receipt of clear, supportive data.
The successful development of our product candidates is highly uncertain and subject to a number of risks including, but not limited to:
|
|
• |
The full impact of COVID-19 pandemic continues to develop and could continue to adversely affect our programs and operations, including our clinical trials, and corporate development and |
24
|
|
other activities. Cyclerion works closely with its clinical trial sites and investigators to deliver trials in a manner consistent with the safety of study participants and healthcare professionals. |
|
|
• |
The duration of clinical trials may vary substantially according to the type and complexity of the product candidate and may take longer than expected. |
|
|
• |
The United States FDA and comparable agencies outside the United States. impose substantial and varying requirements on the introduction of therapeutic pharmaceutical products, which typically require lengthy and detailed laboratory and clinical testing procedures, sampling activities and other costly and time-consuming procedures. |
|
|
• |
Data obtained from nonclinical and clinical activities at any step in the testing process may be adverse and lead to discontinuation or redirection of development activity. Data obtained from these activities also are susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. |
|
|
• |
The duration and cost of discovery, nonclinical studies and clinical trials may vary significantly over the life of a product candidate and are difficult to predict. |
|
|
• |
The costs, timing and outcome of regulatory review of a product candidate may not be favorable, and, even if approved, a product may face post-approval development and regulatory requirements. |
|
|
• |
The emergence of competing technologies and products and other adverse market developments may reduce or eliminate the potential value of our pipeline. |
As a result of the factors listed in the “Risk Factors” section in Item 1A of our annual report on Form 10-K for the fiscal year ended December 31, 2020, and elsewhere in this Quarterly Report on Form 10-Q, we are unable to determine the duration and costs to complete current or future nonclinical and clinical stages of our product candidates or when, or to what extent, we will generate revenues from the commercialization and sale of our 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 expense consists primarily of compensation, benefits and other employee-related expenses for personnel in our administrative, finance, legal, information technology, business development, and human resource functions. Other costs include the legal costs of pursuing patent protection of our intellectual property, general and administrative related facility costs, insurance costs and professional fees for accounting and legal services. Certain costs associated with our separation from Ironwood are included in these expenses. 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. 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 Quarterly Report on Form 10-Q.
25
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 Quarterly Report on Form 10-Q.
Results of Operations
The 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 believed are necessary for an understanding of our consolidated financial statements.
Expenses
|
|
|
Three Months Ended June 30, |
|
|
Change |
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||||||
|
|
|
(dollars in thousands) |
|
|
(dollars in thousands) |
|
||||||||||||||||||||||||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from license agreement |
|
$ |
3,000 |
|
|
$ |
— |
|
|
$ |
3,000 |
|
|
|
100 |
% |
|
$ |
3,000 |
|
|
$ |
— |
|
|
$ |
3,000 |
|
|
|
100 |
% |
|
Revenue from development agreement |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
100 |
% |
|
$ |
62 |
|
|
$ |
— |
|
|
$ |
62 |
|
|
|
100 |
% |
|
Revenue from related party |
|
$ |
— |
|
|
$ |
749 |
|
|
$ |
(749 |
) |
|
|
(100 |
)% |
|
$ |
— |
|
|
$ |
1,763 |
|
|
$ |
(1,763 |
) |
|
|
(100 |
)% |
|
Total revenues |
|
$ |
3,000 |
|
|
$ |
749 |
|
|
$ |
2,251 |
|
|
|
301 |
% |
|
$ |
3,062 |
|
|
$ |
1,763 |
|
|
$ |
1,299 |
|
|
|
74 |
% |
|
Cost and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
12,054 |
|
|
|
13,794 |
|
|
|
(1,740 |
) |
|
|
(13 |
)% |
|
|
20,146 |
|
|
|
30,619 |
|
|
|
(10,473 |
) |
|
|
(34 |
)% |
|
General and administrative |
|
|
6,241 |
|
|
|
6,627 |
|
|
|
(386 |
) |
|
|
(6 |
)% |
|
|
11,606 |
|
|
|
13,518 |
|
|
|
(1,912 |
) |
|
|
(14 |
)% |
|
(Gain) / loss on lease modification and termination |
|
|
881 |
|
|
|
— |
|
|
|
881 |
|
|
|
100 |
% |
|
|
881 |
|
|
|
(2,113 |
) |
|
|
2,994 |
|
|
|
(142 |
)% |
|
Total cost and expenses |
|
|
19,176 |
|
|
|
20,421 |
|
|
|
(1,245 |
) |
|
|
(6 |
)% |
|
|
32,633 |
|
|
|
42,024 |
|
|
|
(9,391 |
) |
|
|
(22 |
)% |
|
Loss from operations |
|
|
(16,176 |
) |
|
|
(19,672 |
) |
|
|
3,496 |
|
|
|
(18 |
)% |
|
|
(29,571 |
) |
|
|
(40,261 |
) |
|
|
10,690 |
|
|
|
(27 |
)% |
|
Interest and other income, net |
|
|
(6 |
) |
|
|
138 |
|
|
|
(144 |
) |
|
|
(104 |
)% |
|
|
(10 |
) |
|
|
499 |
|
|
|
(509 |
) |
|
|
(102 |
)% |
|
Net loss |
|
$ |
(16,182 |
) |
|
$ |
(19,534 |
) |
|
$ |
3,352 |
|
|
|
(17 |
)% |
|
$ |
(29,581 |
) |
|
$ |
(39,762 |
) |
|
$ |
10,181 |
|
|
|
(26 |
)% |
Revenues. As of January 2021, revenues earned from the services performed under the Development Agreement for Ironwood, are not considered to be related party revenues (See Note 3). The increase in revenue of approximately $2.3 million for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, can be attributed to the revenue from the License Agreement, which was executed in June 2021, offset by a decrease in revenue generated from services performed under the Development Agreement, which ended on March 31, 2021.
The increase in revenue of approximately $1.3 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 can be attributed to the revenue from the License Agreement, offset by a decrease in revenue generated from services performed under the Development Agreement.
Research and development expense. The decrease in research and development expense of approximately $1.7 million for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 was driven by a decrease of approximately $4.2 million in salaries, stock-based compensation and other employee-related expenses primarily due to lower average headcount, partially offset by a net increase of approximately $2.3 million in facilities and operating costs allocated to research and development primarily due to $4.2 million of non-cash write off of leasehold improvements, and $1.9 million reduction in the Company’s total leased premises cost, and a net increase of approximately $0.2 million in external research costs. The net increase in external research costs was primarily due to increases of approximately $1.4 million associated with the startup of CY6463 studies, CIAS and ADv, in Q2’21, and approximately $0.6 million for CY3018 costs, offset by a decrease of $1.6 million related to olinciguat due to the completion of the STRONG-SCD study, with topline data read out on October 14, 2020, and a decrease of approximately $0.2 million in discovery research.
26
The decrease in research and development expense of approximately $10.5 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was driven by a decrease of approximately $8.2 million in salaries, stock-based compensation, and other employee-related expenses primarily due to lower average headcount, a decrease of approximately $4.2 million in facilities and operating costs, and a net decrease of approximately $2.3 million in external research costs, partially offset by an increase due to $4.2 million of non-cash write-off of leasehold improvements. The net decrease in external research costs was primarily due to decreases over the periods of approximately $4.0 million related to olinciguat and $0.6 million related to praliciguat studies, due to the completion of both studies, partially offset by an increase of approximately $1.2 million in startup costs for CY6463 studies in CIAS and ADv, an increase of approximately $0.6 million associated with CY3018 and an increase of approximately $0.5 million in discovery research.
General and administrative expense. The decrease in general and administrative expenses of approximately $0.4 million for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 was primarily driven by decreases of approximately $1.3 million in salaries, stock-based compensation and other employee-related expenses due to lower average headcount, and a decrease of approximately $1.2 million in facilities and operating costs, partially offset by an increase of approximately $2.1 million of non-cash write off of leasehold improvements.
The decrease in general and administrative expenses of approximately $1.9 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was primarily driven by a decrease of approximately $2.5 million in salaries, stock-based compensation and other employee-related costs due to lower average headcount, a decrease of approximately $1.1 million in facilities and operating costs, and approximately $0.4 million in professional services, partially offset by $2.1 million of non-cash write off of leasehold improvements.
(Gain) loss on lease modification and termination. The loss on lease modification and termination of approximately $0.9 million for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, which is related to the Lease Termination of the Head Lease at 301 Binney Street in Cambridge, Massachusetts that was executed on April 30, 2021. (see Note 8 to the Condensed Consolidated Financial Statements).
The loss on lease modification and termination of approximately $0.9 million for the six months ended June 30, 2021 is related to the Lease Termination of the Head Lease at 301 Binney Street in Cambridge, Massachusetts that was executed on April 30, 2021, compared to the gain on lease modification and termination of $2.1 million in the six months ended June 30, 2020 related to the Lease Amendment of the Head Lease at 301 Binney Street in Cambridge, Massachusetts that was executed on February 28, 2020 (see Note 8 to the Condensed Consolidated Financial Statements).
Interest and other income, net. Interest and other income, net decreased by approximately $0.1 million for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 due to a decrease of approximately $0.1 million in net sublease income.
Interest and other income, net decreased by approximately 0.5 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 due to a decrease of approximately $0.3 million in interest income driven by a lower cash balances and lower interest rates, partially offset by a decrease of approximately $0.2 million in net sublease income.
Liquidity and Capital Resources
Prior to the Separation, the primary source of liquidity for our business was cash flow allocated to Cyclerion from Ironwood. Post Separation, transfers of cash to and from Ironwood related to the Transition Service Agreements, Development Agreement, and provisions of the Separation Agreement, have been reflected in the consolidated statement of cash flows.
After the Separation on April 1, 2019, we raised approximately $165 million net of direct financing expenses with the closing of the 2019 Equity Private Placement on April 2, 2019.
27
On July 29, 2020, we closed on a private placement of 6,062,500 shares of our common stock, pursuant to a Common Stock Purchase Agreement, for total gross proceeds of approximately $24.3 million. There were no material fees or commissions related to the transaction. The Company intends to use the proceeds to fund working capital and other general corporate purposes.
On September 3, 2020, the Company entered into the Sales Agreement with Jefferies with respect to the ATM Offering under the Shelf. Under the ATM Offering, the Company may 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 Company will pay to Jefferies cash commissions of 3.0 percent of the gross proceeds of sales of common stock under the Sales Agreement. During the three and six months ended June 30, 2021, the Company sold 3,351,559 shares of common stock for net proceeds of $12.5 million under the ATM Offering.
On June 7, 2021, we closed on a private placement of 5,735,988 shares of our common stock, pursuant to a Common Stock Purchase Agreement, for total gross proceeds of approximately $18 million. There were no material fees or commissions related to the transaction. The Company intends to use the proceeds to fund working capital and other general corporate purposes.
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 June 30, 2021, we had approximately $70.4 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
Based on the timing expectations of our research and development plans, including our clinical trials, we expect that our existing cash and cash equivalents as of June 30, 2021 will be sufficient to fund our planned operating expenses and capital expenditure requirements at least through the next 12 months following the date of this Quarterly Report on Form 10-Q. We have based this estimate on assumptions that may prove to be wrong, particularly as the process of testing drug candidates in clinical trials is costly and the timing of progress in these trials is uncertain.
Cash Flows
The following is a summary of cash flows for the years ended June 30, 2021 and 2020:
|
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
|
(dollars in thousands) |
|
|||||||||||||
|
Net cash used in operating activities |
|
$ |
(19,964 |
) |
|
$ |
(43,401 |
) |
|
$ |
23,437 |
|
|
|
(54 |
)% |
|
Net cash provided by (used in) investing activities |
|
$ |
1,464 |
|
|
$ |
(1,421 |
) |
|
$ |
2,885 |
|
|
|
(203 |
)% |
|
Net cash provided by financing activities |
|
$ |
30,657 |
|
|
$ |
3,664 |
|
|
$ |
26,993 |
|
|
|
737 |
% |
Cash Flows from Operating Activities
Net cash used in operating activities was $20.0 million for the six months ended June 30, 2021 compared to $43.4 million for the six months ended June 30, 2020. The decrease in net cash used in operations of $23.4 million primarily relates to a decrease in our net loss of $10.1 million, non-cash leasehold improvement write off of $6.3 million in the current year, the recording of non-cash loss on lease termination of $0.9 million in the current year and non-cash gain on lease modification of $2.1 million in prior year, and a decrease in working capital accounts of $8.4 million, partially offset by a decrease of stock-based compensation and other non-cash items of $4.4 million.
28
Cash Flows from Investing Activities
Net cash provided by investing activities was $1.5 million for the six months ended June 30, 2021 compared to net cash used in investing activities of $1.4 million for the six months ended June 30, 2020. The increase in net cash provided by investing activities of $2.9 million was primarily from an increase in cash received from sale of lab equipment in 2021 compared to purchases of leasehold improvements and other property and equipment in 2020.
Cash Flows from Financing Activities
Net cash provided by financing activities was $30.7 million for the six months ended June 30, 2021 compared to $3.7 million for the six months ended June 30, 2020. The increase of $27.0 million was the result of cash received from the June 2021 Equity Private Placement of $18 million, net proceeds from the ATM Offering of $12.5 million, partially offset by the cash received from the short-term note payable of $3.5 million in 2020.
Debt – Paycheck Protection Program
On April 21, 2020, we received loan proceeds in the amount of approximately $3.5 million pursuant to a promissory note agreement (the “Promissory Note”) with a bank under the Paycheck Protection Program (“PPP”), of which certain key terms were adjusted by the Paycheck Protection Program Flexibility Act (“PPPFA”). The Promissory Note has an initial loan maturity of April 20, 2022, a stated interest rate of 1.0% per annum, and has payments of principal and interest that are due monthly after an initial deferral period where interest accrues, but no payments are due. Under the PPPFA, the initial deferral may be extended from six up to ten months and the loan maturity may be extended from two to five years. The Promissory Note provides for customary events of default, including, among others, those relating to failure to make payment when due and breaches of representations. We may prepay the principal of the Promissory Note at any time without incurring any prepayment charges. The loan is subject to all the terms and conditions applicable under the PPPFA and is subject to review by the Small Business Association for compliance with program requirements.
The loan’s principal and accrued interest are forgivable to the extent that the proceeds are used for eligible purposes, subject to certain limitations, and that we maintain our payroll levels over a twenty-four-week period following the loan date. The loan forgiveness amount may be reduced if we terminate employees or reduce salaries during the twenty-four-week period. We believe that we have used the proceeds for eligible purposes consistent with the provisions of the PPPFA. However, the Company cannot assure at this time that the loan under the Promissory Note will be forgiven partially, or in full.
Funding Requirements
We expect our expenses to fluctuate as we advance the preclinical activities and clinical trials of our product candidates.
We believe that our existing cash and cash equivalents as of June 30, 2021 will enable us to fund our planned operating expenses and capital expenditure requirements at least through the next 12 months following the date of this Quarterly Report on Form 10-Q, excluding net cash flows from potential business development activities. We based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.
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 product candidates, and conducting preclinical studies and clinical trials; |
|
|
• |
costs, timing and outcome of regulatory review of our product candidates; |
29
|
|
• |
costs of future activities, including medical affairs, manufacturing and distribution, for any of our 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 future product candidates, if any. |
A change in any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing of the development of that product candidate. Further, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.
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. To the extent that we raise additional capital through the sale of equity or convertible debt securities, outstanding equity ownership may be materially diluted, and the terms of securities sold in such transactions could include liquidation or other preferences that adversely affect the rights of holders of common stock. 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, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.
If we are unable to raise additional funds when needed, we may be required to delay, reduce or eliminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Commitments and Obligations
Tax-related Obligations
We exclude assets, liabilities or obligations pertaining to uncertain tax positions from our summary of contractual commitments and obligations as we cannot make a reliable estimate of the period of cash settlement with the respective taxing authorities. As of June 30, 2021, we had no uncertain tax positions.
Other Funding Commitments
As of June 30, 2021, we had, and continue to have, several ongoing studies in various clinical trial stages. Our most significant clinical trial spending is with clinical research organizations, or CROs. The contracts with CROs generally are cancellable, with notice, at our option and do not have any significant cancellation penalties.
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.
30
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 Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and are not required to provide the information required under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Because there are inherent limitations in all control systems, a control system, no matter how well conceived and operated, can provide only reasonable, as opposed to absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. 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. Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, as of the end of the period covered by this report. 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.
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 period covered by this Quarterly Report on Form 10-Q which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
31
PART II
Item 1. 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 1A. Risk Factors
You should carefully review and consider the information regarding certain factors which could materially affect our business, financial condition or future results set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
See the Exhibit Index on the following page of this Quarterly Report on Form 10-Q.
32
EXHIBIT INDEX
|
Exhibit No. |
|
Description |
|
|
|
|
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
101.INS |
|
Inline XBRL Instance Document. |
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document. |
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. |
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
|
104 |
|
Cover Page Interactive Data File. |
* 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.
33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
CYCLERION THERAPEUTICS, INC. |
|
|
|
|
|
|
|
By: |
/s/ Peter Hecht |
|
|
Name: |
Peter M. Hecht |
|
|
Title: |
Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
|
|
By: |
/s/ Anjeza Gjino |
|
|
Name: |
Anjeza Gjino |
|
|
Title: |
Chief Financial Officer (Principal Financial and Accounting Officer) |
Date: July 29, 2021
34
Exhibit 10.2
Certain information has been excluded from this agreement (indicated by “[***]”) because such information is both not material and the type that the registrant treats as private or confidential.
CONFIDENTIAL
LICENSE AGREEMENT
This License Agreement (this “Agreement”) is made effective as of June 3, 2021 (the “Effective Date”) by and between Cyclerion Therapeutics, Inc., a Massachusetts corporation (“Cyclerion”) and Akebia Therapeutics, Inc., a Delaware corporation (“Akebia”) (each of Cyclerion and Akebia being a “Party”, and collectively, the “Parties”).
WHEREAS, Cyclerion controls certain intellectual property rights with respect to the Licensed Compounds (as defined herein) and Products (as defined herein) in the Territory (as defined herein); and
WHEREAS, Cyclerion wishes to grant to Akebia, and Akebia wishes to be granted, an exclusive license under such intellectual property rights to Exploit (as defined herein) Licensed Compounds and Products in the Territory, in each case, in accordance with the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual promises and conditions hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, do hereby agree as follows:
The following terms, whether used in the singular or the plural, shall have the meanings designated to them under this Article unless otherwise specifically indicated.
|
1.3 |
“Agreement” has the meaning set forth in the preamble hereto. |
|
1.4 |
“Akebia” has the meaning set forth in the preamble hereto. |
|
1.5 |
“Akebia Indemnitees” has the meaning set forth in Section 12.1. |
1
CONFIDENTIAL
|
1.7 |
“Akebia Primary Patents” has the meaning set forth in Section 9.2(b)(i). |
|
1.9 |
“Business Day” means any day except (a) Saturday, (b) Sunday, (c) any day that is a federal legal holiday in the U.S., or (d) any day on which banking institutions in the Commonwealth of Massachusetts are authorized or required by law or other governmental action to close. |
|
1.10 |
“Calendar Quarter” means each successive period of three (3) calendar months commencing on January 1, April 1, July 1 and October 1, except that the first Calendar Quarter of the Term shall commence on the Effective Date and end on the day immediately prior to the first to occur of January 1, April 1, July 1 or October 1 after the Effective Date, and the last Calendar Quarter shall end on the last day of the Term. |
|
1.12 |
“Centralized Approval Procedure” means the procedure through which a MAA filed with the EMA results in a single marketing authorization valid throughout the European Union. |
|
1.14 |
“Combination Product” means a Product that is comprised of or contains a Licensed Compound as an active ingredient together with one or more other active ingredients and is sold either as a fixed dose or as separate doses but in any event for a single price. |
|
1.16 |
“Commercial Sublicense Income” means any consideration received by Akebia or any of its Affiliates solely on the basis of sales of the Products by any Significant Sublicensee in any of the Major Countries (and sales by such Significant Sublicensee in any other countries or other jurisdictions in the Territory to the extent included in the grant of such a sublicense for any Major Country), including [***]. Notwithstanding any provision to the contrary set forth in this Agreement, Commercial Sublicense Income shall exclude [***]. To the extent that Akebia or its Affiliates receives any amounts not solely related to the sale of the Products, then the “Commercial Sublicense Income” attributable to the Products will be apportioned between [***]. |
|
1.17 |
“Commercially Reasonable Efforts” means, with respect to the efforts to be expended by a Party with respect to any objective or activity, [***]. |
2
CONFIDENTIAL
|
1.20 |
“Control Transferring Patent” has the meaning set forth in Section 9.2(a)(i). |
|
1.21 |
“Convicted Entity” has the meaning set forth in Section 11.3(d). |
|
1.22 |
“Convicted Individual” has the meaning set forth in Section 11.3(d). |
|
1.24 |
“Cyclerion” has the meaning set forth in the preamble hereto. |
|
1.25 |
“Cyclerion Competing Product” means any pharmaceutical product that contains [***]. |
|
1.26 |
“Cyclerion Indemnitee” has the meaning set forth in Section 12.2. |
|
1.28 |
“Cyclerion Intellectual Property” means the Cyclerion Patents and Cyclerion Know-How and Cyclerion’s interest in the Joint Intellectual Property Rights. |
3
CONFIDENTIAL
|
1.30 |
“Cyclerion Patent” means any Patent, other than a Joint Patent, Controlled by Cyclerion or its Affiliates as of the Effective Date or [***]. |
|
1.31 |
“Debarred Entity” has the meaning set forth in Section 11.3(b). |
|
1.32 |
“Debarred Individual” has the meaning set forth in Section 11.3(a). |
|
1.34 |
“Development Materials” has the meaning set forth in Section 5.4. |
|
1.35 |
“Development Plan” has the meaning set forth in Section 3.1. |
|
1.36 |
“Dollars” means U.S. dollars. |
|
1.37 |
“Drug Product” means that certain finished Product manufactured [***]. |
|
1.38 |
“Effective Date” has the meaning set forth in the preamble hereto. |
|
1.39 |
“EMA” means the European Medicine Agency or any successor agency thereto or authority having substantially the same function. |
|
1.40 |
“E.U. Regulatory Approval” means (a) receipt of Regulatory Approval by the EMA through the Centralized Approval Procedure or (b) receipt of Regulatory Approval from the applicable Regulatory Authorities in [***] Major European Countries. |
|
1.41 |
“European Union” or “E.U.” means the economic, scientific, and political organization of member states known as the European Union, as its membership may be altered from time to time, and any successor thereto; provided that for the purposes of this Agreement, the European Union shall be deemed to include the United Kingdom. |
|
1.42 |
“Excluded Entity” has the meaning set forth in Section 11.3(c). |
4
CONFIDENTIAL
|
1.43 |
“Excluded Individual” has the meaning set forth in Section 11.3(c). |
|
1.45 |
“Executive Officer” means, with respect to Cyclerion, its Chief Executive Officer and, with respect to Akebia, its Chief Executive Officer. |
|
1.46 |
“Existing Drug Substance” means the existing inventory of praliciguat drug substance that Cyclerion has on hand as of the Effective Date, [***]. |
|
1.47 |
“Exploit” means to Develop, Manufacture, perform Medical Affairs with respect to, Commercialize, and otherwise make, use, sell, offer for sale, or import. |
|
1.48 |
“FDA” means the U.S. Food and Drug Administration or any successor agency thereto or authority having substantially the same function. |
|
1.49 |
“FDA’s Disqualified/Restricted List” has the meaning set forth in Section 11.3(d). |
|
1.51 |
“Field” means the treatment, prevention, or diagnosis of any diseases or conditions in humans. |
|
1.52 |
“First Commercial Sale” means, with respect to a Product and a country or other jurisdiction in the Territory, the first bona fide, arm’s length sale of such Product in such country after Regulatory Approval has been obtained for such Product in such country or other jurisdiction. First Commercial Sale excludes any sale or other distribution of a Product for Clinical Trial or other Development purposes, early access programs (such as to provide patients with such Product prior to Regulatory Approval pursuant to treatment INDs or protocols, named patient programs or compassionate use programs) or any similar use. |
|
1.53 |
“GAAP” means U.S. generally accepted accounting principles (or such accounting principles adopted by Akebia for the calculation of Net Sales, as applicable), consistently applied. |
|
1.54 |
“Generic Product” means, with respect to a Product and a particular country, any pharmaceutical product that (a) is sold in such country by a Third Party that is not a Sublicensee of Akebia or its Affiliates, or any of their Sublicensees, under a Regulatory Approval granted by the applicable Regulatory Authority to a Third Party, (b) contains as an active ingredient the same active ingredient as such Product, and (c) is approved in part in reliance on the prior approval (or on safety or efficacy data submitted in support of the prior approval) of such Product (i) in the U.S., pursuant to Section 505(b)(2) or Section 505(j) of the FFDCA (21 U.S.C. 355(b)(2) and 21 U.S.C. 355(j), respectively), or (ii) in any other country or jurisdiction in the Territory, pursuant to all equivalents of any of the foregoing. Notwithstanding the foregoing, [***]. |
5
CONFIDENTIAL
|
entitled “Guidance for Industry E6 Good Clinical Practice: Consolidated Guidance,” and including related regulatory requirements imposed by the FDA or EMA, as applicable. |
6
CONFIDENTIAL
|
1.69 |
“Knowledge” means the actual knowledge, as of the Effective Date, of the individuals of Cyclerion [***]. |
|
1.77 |
“Manufacturing Process Patents” means any Patents Controlled by Akebia that Cover any Manufacturing Process Improvements. |
7
CONFIDENTIAL
8
CONFIDENTIAL
|
1.94 |
“Patent Transfer Date” means the earlier of [***], and (b) such date that the Parties may agree, following request by Akebia or Cyclerion. |
|
1.95 |
“Person” means any individual, corporation, partnership, limited liability company, trust, governmental entity, or other legal entity of any nature whatsoever. |
|
1.98 |
“PMDA” means the Pharmaceuticals and Medical Devices Agency of Japan or any successor agency thereto or authority having substantially the same function. |
9
CONFIDENTIAL
10
CONFIDENTIAL
|
Countries and Sublicensee has the right to record such Product sales in its financial statements in accordance with U.S. GAAP or similar accounting standards in countries outside of the U.S.. |
|
1.116 |
“Third Party” means any person or entity other than Cyclerion, Akebia, and their respective Affiliates. |
11
CONFIDENTIAL
|
3.6 |
Records. Akebia shall maintain records in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes, and in compliance with applicable law, which shall reflect all work done and results achieved in the performance of its Development activities for the Products in the Field in the Territory. Such records shall be retained by Akebia for at least [***] |
12
CONFIDENTIAL
|
years after the termination of this Agreement, or for such longer period as may be required by applicable law. |
Article 4
REGULATORY MATTERS
Article 5
MANUFACTURE AND SUPPLY OF PRODUCT AND PRE-CLINICAL MATERIALS
|
5.2 |
Compliance; Warranties. The Supply Agreement will contain terms and conditions regarding compliance with applicable law and specifications for the Existing Drug Substance and Drug Product, delivery, acceptance, recalls, indemnification, and limitations of liability. |
13
CONFIDENTIAL
|
5.7 |
Transfer of Responsibility for Manufacturing. Upon request by Akebia (but no later than the date of delivery of the Initial Supply to Akebia or its designee, as the case may be), on a |
14
CONFIDENTIAL
|
manufacturer-by-manufacturer and material-by-material basis, the Parties shall collaborate to [***], each a “Manufacturing Transfer Plan”). For the avoidance of doubt, Akebia may request the [***]. |
Article 6
MEDICAL AFFAIRS AND COMMERCIALIZATION
|
6.1 |
Medical Affairs and Commercialization. Subject to the terms of this Agreement, Akebia shall have sole control over and decision-making authority with respect to the performance of Medical Affairs and Commercialization of the Products in the Field in the Territory, including the establishment and implementation of its commercial strategy. Akebia shall be solely responsible for all costs and expenses associated with its performance of Medical Affairs and Commercialization of the Products in the Field in the Territory. |
|
6.3 |
Statements and Compliance with Applicable Law. Akebia shall, and shall cause its Affiliates to, comply with all applicable law with respect to the Commercialization of Products. |
15
CONFIDENTIAL
|
set forth in Table 7.2 within [***] after the first achievement of each of the following milestones by Akebia or its Affiliates for the first Product: |
|
Table 7.2 – Development and Regulatory Milestones |
|
|
U.S. |
Development and Regulatory Milestone Payment |
|
Initiation of a Phase 2 Clinical Trial in the U.S. for a Product for the first Indication |
[***] |
|
Initiation of a Phase 3 Clinical Trial in the U.S. for a Product for the first Indication |
[***] |
|
Initiation of a Phase 3 Clinical Trial in the U.S. for a Product for the second Indication |
[***] |
|
Receipt of Regulatory Approval by the FDA for a Product for the first Indication |
[***] |
|
Receipt of Regulatory Approval by the FDA for a Product for the second Indication |
[***] |
|
[***] |
[***] |
|
[***] |
Development and Regulatory Milestone Payment |
|
Receipt of [***] Regulatory Approval for a Product for the first Indication |
[***] |
|
Receipt of [***] Regulatory Approval for a Product for the second Indication |
[***] |
|
[***] |
[***] |
|
[***] |
Development and Regulatory Milestone Payment |
|
Receipt of Regulatory Approval by [***] for a Product for the first Indication |
[***] |
|
Receipt of Regulatory Approval by [***] for a Product for the second Indication |
[***] |
|
[***] |
[***] |
Each milestone payment in this Section 7.2 shall be payable one time only upon the first achievement of such milestone by the first Product.
If Akebia or its Affiliates achieves any milestone set forth in this Section 7.2 for a particular Product in a particular Indication before an earlier listed milestone for the same Product in the same Indication, then the earlier listed milestone shall become payable at the same time as the achieved milestone for the same Product in such Indication. No milestone payments in this Section 7.2 shall be due based on the achievement of any of the foregoing milestone events by any Significant Sublicensee.
16
CONFIDENTIAL
|
Table 7.4 – Sales Milestones |
|
|
[***] |
[***] |
|
[***] |
[***] |
|
[***] |
[***] |
|
[***] |
[***] |
For the avoidance of doubt, each sales milestone payment in this Section 7.4(a) shall be payable one time only upon the first achievement of such sales milestone event [***]. For the avoidance of doubt, (i) the maximum aggregate amount payable by Akebia pursuant to this Section 7.4(a) [***], and (ii) the maximum aggregate amount payable by Akebia pursuant to this Section 7.4(a) worldwide is [***].
|
Table 7.5 – Akebia Royalties [***] |
|
|
[***] |
[***] |
|
[***] |
[***] |
|
[***] |
[***] |
|
[***] |
[***] |
|
[***] |
[***] |
|
[***] |
[***] |
17
CONFIDENTIAL
|
|
by Akebia or its Affiliates or Sublicensees (other than a Significant Sublicensee) of all Products [***] in a [***]. |
|
|
(d) |
Royalty Term. Akebia shall have no obligation to pay any royalty pursuant to this Section 7.5 with respect to sales of any Product in any country or other jurisdiction after the Royalty Term for such Product in such country or other jurisdiction has expired. |
18
CONFIDENTIAL
|
|
(a) |
Akebia shall pay to Cyclerion an amount equal to [***]. |
|
|
(b) |
Akebia shall pay to Cyclerion an amount equal to [***]. |
|
|
(d) |
Akebia shall pay Cyclerion its portion of all [***]. |
|
7.9 |
Taxes. |
|
|
(a) |
[***]. |
|
|
(b) |
[***]. |
|
|
(b) |
Access to Records. At the request of Cyclerion, Akebia shall, and shall cause its Affiliates and Sublicensees to, permit an independent auditor designated by Cyclerion and reasonably acceptable to Akebia, at reasonable times and upon at least [***] advance notice, to audit the books and records maintained pursuant to Section 7.11(a) to ensure the accuracy of all reports and payments made hereunder relating to Net Sales, royalties, Non-Commercial |
19
CONFIDENTIAL
|
|
Sublicense Income, and Commercial Sublicense Income. Except as provided below, the cost of this audit shall be borne by Cyclerion, unless the audit reveals a variance of more than [***] from the reported amounts, in which case Akebia shall bear the cost of the audit. If such audit concludes that (i) additional amounts were owed by Akebia, then Akebia shall pay the additional amounts, with interest from the date originally due as provided in Section 7.10, or (ii) excess payments were made by Akebia, then Cyclerion shall reimburse such excess payments, in either case ((i) or (ii)), within [***] after the date on which such audit is completed by Cyclerion. |
Article 8
LICENSE RIGHTS AND LIMITATIONS
|
8.5 |
Survival of Sublicenses. Upon [***] not then in breach of its sublicense agreement or the terms of this Agreement applicable to such Sublicensee, Cyclerion will enter into a direct license from |
20
CONFIDENTIAL
Article 9
INTELLECTUAL PROPERTY
21
CONFIDENTIAL
|
|
All Manufacturing Process Improvements shall be the Confidential Information of Akebia and Akebia shall be under no obligation to disclose the technical details or other information required to enable Cyclerion to practice any Manufacturing Process Improvements, except pursuant to the terms of a license agreement negotiated between the Parties as provided herein. [***].
22
CONFIDENTIAL
|
|
Schedule 9.2(a) (the “Control Transferring Patents”), at its sole cost and expense and by Cyclerion’s counsel as of the Effective Date, provided that: |
(1)If Cyclerion chooses to use counsel other than its counsel as of the Effective Date, then such counsel shall be reasonably acceptable to Akebia;
(2)Cyclerion shall consult with Akebia on all prosecution strategies, including what subject matter to pursue in an application, strategies for responding to substantive communications from a patent office, and divisional filing strategies with respect to the Control Transferring Patents;
(3)Cyclerion shall provide Akebia copies of all correspondence received from the relevant patent office regarding the Control Transferring Patents;
(4)Cyclerion shall provide Akebia copies of all documents relevant to such filing and prosecution at least [***] prior to submission of such documents to the applicable patent office;
(5)Cyclerion shall incorporate all reasonable comments with respect to any Control Transferring Patent provided by Akebia no later than [***] prior to the next deadline for the applicable action that must be taken with respect to such Control Transferring Patent, except that the foregoing obligation will not be construed to require Cyclerion to take any course of action that would negatively impact patent protection for Cyclerion’s proprietary compound, olinciguat, unless such course of action may be necessary to maintain patent protection for praliciguat;
(6)Cyclerion shall not, without the prior written consent of Akebia, file a divisional application for any Control Transferring Patent; provided, however, that, no such consent shall be required to file any divisional application that contains claims solely Covering Cyclerion’s proprietary compound, olinciguat, unless such divisional filing could negatively impact any issued patent or pending application Covering praliciguat, in which case, prior written consent of Akebia is required;
(7)Cyclerion shall not, without the prior written consent of Akebia, abandon or cease prosecution or maintenance of any Control Transferring Patent;
(8)Cyclerion shall use reasonable efforts to prepare, file, prosecute, and maintain the Control Transferring Patents so as to maximize the protection offered by such Control Transferring Patents for the Licensed Compounds and Products;
(9)the Control Transferring Patents shall be deemed the Confidential Information of both Parties;
(10)Cyclerion shall not, without the prior written consent of Akebia, (A) grant any Third Party control over the preparation, filing, prosecution, or maintenance of any Control Transferring Patent or (B) any right to comment on Cyclerion’s preparation, filing, prosecution, or maintenance of any Control Transferring Patent that either (I) would permit such Third Party to provide comments directly to Akebia after the Patent Transfer Date, or (II) exceeds or is otherwise incompatible with Cyclerion’s right to provide comments after the Patent Transfer Date as provided under Section 9.2(b)(i); and
(11)Cyclerion shall not, without the prior written consent of Akebia, take or fail to take any action (whether alone or in conjunction with other actions) in the course of
23
CONFIDENTIAL
preparation, filing, prosecution, and maintenance of any Control Transferring Patent that could materially diminish or limit the scope of such Control Transferring Patent’s protection of one or more Licensed Compounds or Products (if such Control Transferring Patent were to issue in its then-current form) in favor of increasing the protection of any other compound or product, including for the avoidance of doubt, Cyclerion’s proprietary compound, olinciguat. If at any time any course of action taken by Cyclerion may negatively impact patent protection for the Licensed Compounds or Products, then upon Akebia’s request Cyclerion shall cease such action.
|
|
(b) |
Prosecution of Control Transferring Patents After Patent Transfer Date and Joint Patents. |
|
|
(ii) |
In the event that Akebia desires to abandon or cease prosecution or maintenance of any Akebia Primary Patent, Akebia shall provide reasonable prior written notice to Cyclerion of such intention to abandon (which notice shall, to the extent possible, be given no later than [***] prior to the next deadline for any action that must be taken with respect to any such Akebia Primary Patent in the relevant patent office). In such case, upon Cyclerion’s written election provided no later than [***] after such notice from Akebia, Cyclerion shall have the right to assume the prosecution and maintenance of such Akebia Primary Patent at Cyclerion’s expense. |
24
CONFIDENTIAL
|
|
reasonable comments with respect thereto provided by Akebia no later than [***] prior to the next deadline for the applicable action that must be taken with respect to any such Non-Control Transferring Patent. Cyclerion shall not take any action that could jeopardize the validity or enforceability of the Akebia Primary Patents or any action may negatively impact the Akebia Primary Patents. |
|
|
(ii) |
In the event that Cyclerion desires to abandon or cease prosecution or maintenance of any Non-Control Transferring Patent, Cyclerion shall provide reasonable prior written notice to Akebia of such intention to abandon (which notice shall, to the extent possible, be given no later than [***] prior to the next deadline for any action that must be taken with respect to any such Non-Control Transferring Patent in the relevant patent office). In such case, upon Akebia’s written election provided no later than [***] after such notice from Cyclerion, Akebia shall have the right to assume the prosecution and maintenance of such Non-Control Transferring Patent at Akebia’s expense. If Akebia does not provide such election within [***] after such notice from Cyclerion, Cyclerion may, in its sole discretion, continue or discontinue prosecution and maintenance of such Non-Control Transferring Patent. |
|
|
(d) |
Update to Schedule 1.30 upon Patent Transfer. [***] after the Patent Transfer Date, but in any event within [***], Cyclerion shall provide Akebia an updated Schedule 1.30 setting forth all Cyclerion Patents existing as of the Patent Transfer Date. |
|
|
(e) |
Cooperation. Each Party shall provide the other Party all reasonable assistance and cooperation, at the other Party’s request and expense, in the patent prosecution efforts provided above in this Section 9.2, including providing any necessary powers of attorney, executing any other required documents or instruments for such prosecution, and making its personnel with appropriate scientific expertise available to assist in such efforts. |
25
CONFIDENTIAL
26
CONFIDENTIAL
|
|
9.4 in a manner that, or knowingly take any other action in the course thereof that, materially adversely affects the other Party’s interest in the Non-Control Transferring Patent or Akebia Primary Patents, without the written consent of such other Party, such consent not to be unreasonably withheld, conditioned or delayed. |
27
CONFIDENTIAL
|
|
(b) |
has been in the receiving Party’s possession prior to disclosure by the disclosing Party without any obligation of confidentiality with respect to such information; |
|
|
(c) |
is subsequently received by the receiving Party from a Third Party without restriction and without breach of any agreement between such Third Party and the disclosing Party; or |
|
|
(d) |
has been independently developed by or for the receiving Party without reference to, or use or disclosure of the disclosing Party’s Confidential Information. |
Specific aspects or details of Confidential Information shall not be deemed to be within the public domain or in the possession of the receiving Party merely because the Confidential Information is embraced by more general information in the public domain or in the possession of the receiving Party. Further, any combination of Confidential Information shall not be considered in the public domain or in the possession of the receiving Party merely because individual elements of such Confidential Information are in the public domain or in the possession of the receiving Party unless the combination and its principles are in the public domain or in the possession of the receiving Party.
|
10.2 |
Permitted Disclosures. Each Party may disclose Confidential Information to the extent that such disclosure is: |
|
|
(b) |
made by or on behalf of the receiving Party to the Regulatory Authorities as required in connection with any Regulatory Submission or in connection with any inspection or audit by any Regulatory Authority; |
28
CONFIDENTIAL
|
|
Compounds or the Products, or otherwise in connection with the performance of its obligations or exercise of its rights as contemplated by this Agreement; provided, however, that such Persons shall be subject to obligations of confidentiality and non-use with respect to such Confidential Information no less stringent than the obligations of confidentiality and non-use of the receiving Party pursuant to this Article 10; |
|
|
(d) |
subject to Section 9.4, made by or on behalf of the receiving Party to a patent authority as may be reasonably [***] for purposes of filing, prosecuting, maintaining, enforcing, or defending a Patent as permitted under this Agreement; or |
|
10.6 |
Return of Confidential Information. Upon the effective date of the termination of this Agreement for any reason, either Party may request in writing, and the other Party shall either, with |
29
CONFIDENTIAL
|
respect to Confidential Information to which such first Party does not retain rights under the surviving provisions of this Agreement: (a) promptly destroy all copies of such Confidential Information in the possession of the other Party and confirm such destruction in writing to the requesting Party; or (b) promptly deliver to the requesting Party, at the other Party’s expense, all copies of such Confidential Information in the possession of the other Party; provided, however, the other Party shall be permitted to retain copies of such Confidential Information for the sole purpose of performing any continuing obligations hereunder or for archival purposes. Notwithstanding the foregoing, such other Party also shall be permitted to retain such additional copies of or any computer records or files containing such Confidential Information that have been created solely by such Party’s automatic archiving and back-up procedures, to the extent created and retained in a manner consistent with such other Party’s standard archiving and back-up procedures, but not for any other use or purpose. |
Article 11
REPRESENTATIONS AND WARRANTIES
|
11.1 |
Representations and Warranties by Cyclerion. Cyclerion hereby represents and warrants to Akebia as of the Effective Date as follows: |
|
|
(a) |
the execution, delivery, and performance of this Agreement have been duly authorized by all necessary corporate actions; |
|
|
(b) |
this Agreement constitutes a valid obligation of Cyclerion and is binding and enforceable against Cyclerion in accordance with the terms hereof; |
|
|
(c) |
Cyclerion and, to Cyclerion’s Knowledge, its contractors and consultants, have complied in all material respects with all applicable law in the Development and Manufacture of the Licensed Compound and Product prior to the Effective Date; |
|
|
(d) |
Cyclerion has the corporate power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder, and there is no contractual restriction or other legal obligation binding on Cyclerion that would be contravened by execution and delivery of this Agreement or by the performance or observance of its terms; |
|
|
(e) |
Cyclerion has not granted, and will not grant during the Term, a license or sublicense to any Affiliate or Third Party under the Cyclerion Intellectual Property that would conflict with the rights granted to Akebia hereunder; |
30
CONFIDENTIAL
|
|
(i) |
to Cyclerion’s Knowledge, the Cyclerion Patents set forth on Schedule 1.30 have been diligently prosecuted with the respective patent offices where such Cyclerion Patents have been filed in the Territory in accordance with applicable law, and all applicable fees necessary to maintain the Cyclerion Patents set forth on Schedule 1.30 have been paid on or before the due date for such payment; |
|
|
(j) |
each individual who is an inventor of or otherwise has or has had any rights in or to any Cyclerion Patents identified as being owned by Cyclerion on Schedule 1.30 has assigned to Cyclerion all of his or her interest therein; |
|
|
(k) |
Cyclerion is entitled to grant the licenses specified herein; |
|
|
(l) |
the conception, development, and reduction to practice of any of the Cyclerion Intellectual Property have not constituted or involved the misappropriation of trade secrets or other intellectual property rights of any Third Party; |
|
|
(m) |
the process used by Cyclerion to Manufacture the Licensed Compounds or Products (as applicable) as of the Effective Date does not require the use of any Third Party intellectual property right; |
|
|
(o) |
no Third Party has challenged the ownership, scope, duration, validity, enforceability, priority, or right to use any Cyclerion Patent (including, by way of example, through the institution of or written threat of institution of interference, inter partes review, reexamination, protest, opposition, nullity, or similar invalidity proceeding before the United States Patent and Trademark Office or any foreign patent authority or court); |
|
|
(p) |
Cyclerion has not previously assigned, transferred, conveyed, or granted any license or other rights under the Cyclerion Intellectual Property, except in each case where such assignment, transfer, conveyance, or grant is not inconsistent with the rights and licenses granted to Akebia under this Agreement; |
31
CONFIDENTIAL
|
|
inventions is not permitted by applicable law, will be) assigned in writing to Cyclerion pursuant to a written agreement to assign such inventions and discoveries to Cyclerion; |
|
|
(t) |
all INDs owned or Controlled by Cyclerion that cover any Licensed Compound are listed on Schedule 4.1; |
32
CONFIDENTIAL
|
11.2 |
Representations and Warranties by Akebia. Akebia hereby represents and warrants to Cyclerion as of the Effective Date as follows: |
|
|
(a) |
The execution, delivery, and performance of this Agreement have been duly authorized by all necessary corporate actions; |
|
|
(b) |
This Agreement constitutes a valid obligation of Akebia and is binding and enforceable against Akebia in accordance with the terms hereof; and |
|
|
(c) |
Akebia has the corporate power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder, and there is no contractual restriction or obligation binding on Akebia that would be contravened by execution and delivery of this Agreement or by the performance or observance of its terms. |
33
CONFIDENTIAL
|
|
or is otherwise ineligible to participate in federal procurement and non-procurement programs, including those produced by the U.S. General Services Administration (GSA). |
34
CONFIDENTIAL
Article 13
TERM AND TERMINATION
35
CONFIDENTIAL
|
|
to be agreed by the Parties in order to permit the breaching Party a reasonable period of time to cure such breach (but in no event will such additional time period be more than [***]. Any notice provided pursuant to this Section 13.2(b) shall identify with particularity the alleged breach and state the non-breaching Party’s intent to terminate this Agreement if such breach is not cured. If the material breach described in the notice of such material breach solely pertains to one or more specific Major Countries, then the other Party may terminate this Agreement solely with respect to those Major Countries to which such breach pertains. |
36
CONFIDENTIAL
|
|
any of its Affiliates or licensees; (ii) any Patent Challenge to the extent commenced by a Third Party that after the Effective Date acquires or is acquired by Akebia or any of its Affiliates or its of their business or assets, whether by stock purchase, merger, asset purchase or otherwise; provided that such proceeding commenced prior to the closing of such acquisition; or (iii) any Patent Challenge that is commenced by a Sublicensee; provided that Akebia demands that such Sublicensee withdraw such Patent Challenge promptly after Akebia becomes aware of such Patent Challenge and terminates the sublicense agreement with the applicable Sublicensee if such Sublicensee does not withdraw such Patent Challenge [***] after receipt of notice from Akebia. |
37
CONFIDENTIAL
|
|
performance by Akebia will release Cyclerion from liability resulting from rejection of the license or the failure to perform such obligations; and |
|
13.3 |
Consequences of Termination. In the event of a termination of this Agreement in its entirety for any reason, the following will apply: |
|
|
(a) |
all rights and licenses granted by Cyclerion hereunder shall immediately terminate; |
38
CONFIDENTIAL
|
|
all applicable laws and regulations or (B) transfer such on-going Clinical Trials in the Territory to Cyclerion; |
39
CONFIDENTIAL
If to Akebia, to:
Akebia Therapeutics, Inc.
245 First Street
14th Floor
Cambridge, MA 02142
Attention: [***]
Email: [***]
with a copy (which shall not constitute notice) to:
Akebia Therapeutics, Inc.
245 First Street
Cambridge, MA 02142
Attention: [***]
Email: [***]
And
Ropes & Gray LLP
Prudential Tower, 800 Boylston Street
Boston, MA 02199-3600
Attention: [***]
Email: [***]
If to Cyclerion, to:
Cyclerion Therapeutics, Inc.
245 First Street
Riverview II, 18th Floor
Cambridge, MA 02142
40
CONFIDENTIAL
Attention: [***]
with a copy (which shall not constitute notice) to:
Cyclerion Therapeutics, Inc.
245 First Street
Riverview II, 18th Floor
Cambridge, MA 02142
Attention: [***]
|
14.4 |
Designation of Affiliates. Each Party may discharge any obligations and exercise any rights hereunder through delegation of its obligations or rights to any of its Affiliates. Each Party hereby guarantees the performance by its Affiliates of such Party’s obligations under this Agreement and will cause its Affiliates to comply with the provisions of this Agreement in connection with such performance. |
|
14.5 |
Further Assurance. Each of Cyclerion and Akebia agrees to duly execute and deliver, or cause to be duly executed or delivered, such further instruments and do and cause to be done such further acts, including the filing of additional assignments, agreements, documents, and instruments, as the other Party may at any time and from time to time reasonably request in connection with this |
41
CONFIDENTIAL
|
Agreement or to carry out more effectively the provisions and purposes of, or to better assure and confirm unto such other Party its rights and remedies under, this Agreement. |
42
CONFIDENTIAL
43
CONFIDENTIAL
|
|
(b) |
Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF. NOTWITHSTANDING THE FOREGOING, NEITHER PARTY WAIVES ANY RIGHT TO A JURY PROCEEDING FOR THE DETERMINATION OF DAMAGES ARISING FROM ANY SUCH ACTION PROCEEDING OR COUNTERCLAIM. |
|
|
(c) |
Disputes Related to Patent Rights. Notwithstanding anything in this Agreement to the contrary, any and all issues regarding the validity and enforceability of any Patent shall be determined in a court or other tribunal, as the case may be, of competent jurisdiction under the applicable Patent laws of such country, with a jury trial being however excluded. If such dispute involves such Patent matters and other matters, the arbitrators will have the right to stay the arbitration until determination of such Patent matters material to the resolution of the dispute as to the other matters is resolved. |
|
|
(d) |
Injunctive Relief. Nothing contained in the Agreement shall deny either Party the right to injunctive relief, equitable relief, interim or provisional relief including a temporary restraining order, specific performance, preliminary or permanent injunction or other interim equitable relief from a court of competent jurisdiction in the context of a breach or threatened breach of any provision of the Agreement, bona fide emergency or prospective irreparable harm, or as reasonable and necessary to protect its legitimate interests. Such an action may be filed and maintained, notwithstanding any ongoing discussions between the Parties or any ongoing arbitration proceeding concerning a dispute if necessary to protect the interests of such Party or to preserve the status quo pending the arbitration proceeding. |
[SIGNATURES PAGE FOLLOWS]
44
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the Effective Date by their respective duly authorized officers.
|
CYCLERION PHARMACEUTICALS, INC. |
||
|
|
|
|
|
|
|
|
|
By: |
|
/s/ Cheryl Gault |
|
Name: |
|
Cheryl Gault |
|
Title: |
|
Chief Operating Officer |
|
|
|
|
|
|
|
|
|
AKEBIA THERAPEUTICS, INC. |
||
|
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|
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By: |
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/s/ John P. Butler |
|
Name: |
|
John P. Butler |
|
Title: |
|
Chief Executive Officer |
|
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|
|
|
|
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|
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By: |
|
/s/ David A. Spellman |
|
Name: |
|
David A. Spellman |
|
Title: |
|
Chief Financial Officer |
[Signature Page to Akebia Cyclerion License Agreement]
Schedule 1.8
Assigned Trademarks
[***]
Schedule 1.30
Cyclerion Patents
|
Reference |
Title |
Country |
Status |
Application No. |
Filing Date |
Publication No. |
Publication Date |
Patent No. |
Issue Date |
|
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|
|
|
|
|
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|
|
|
|
|
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|
|
|
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|
|
|
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|
|
|
|
|
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|
|
|
|
|
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|
|
|
|
|
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|
|
|
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|
|
[***] |
[***] |
|
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|
|
|
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|
|
[***] |
[***] |
|
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
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Licensed Compounds
[***]
Schedule 1.81
CONFIDENTIAL
Schedule 3.3
Initial Development Plan
[***]
CONFIDENTIAL
Schedule 4.1
Existing INDs
[***]
1
CONFIDENTIAL
Schedule 5.3
Estimated Initial Supply
[***]
1
CONFIDENTIAL
Schedule 9.2(a)
Control Transferring Patents
[***]
CONFIDENTIAL
Schedule 9.2(c)
Non-Control Transferring Patent
[***]
Schedule 11.1(u)
Agreements relating to the Manufacture or supply of the Licensed Compounds and Products
Development Materials and related contracts:
[***]
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Peter M. Hecht, certify that:
1. I have reviewed this quarterly report on Form 10-Q 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)) 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) 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
(c) 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: July 29, 2021 |
By: |
/s/ Peter M. Hecht |
|
|
Name: |
Peter M. Hecht |
|
|
Title: |
Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Anjeza Gjino, certify that:
1. I have reviewed this quarterly report on Form 10-Q 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)) 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) 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
(c) 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: July 29, 2021 |
By: |
/s/ Anjeza Gjino |
|
|
Name: |
Anjeza Gjino |
|
|
Title: |
Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Peter M. Hecht, 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 Quarterly Report on Form 10-Q of Cyclerion Therapeutics, Inc. for the period ended June 30, 2021 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-Q fairly presents, in all material respects, the financial condition and results of operations of Cyclerion Therapeutics, Inc.
|
Date: July 29, 2021 |
By: |
/s/ Peter M. Hecht |
|
|
Name: |
Peter M. Hecht |
|
|
Title: |
Chief Executive Officer (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Anjeza Gjino, 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 Quarterly Report on Form 10-Q of Cyclerion Therapeutics, Inc. for the period ended June 30, 2021 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-Q fairly presents, in all material respects, the financial condition and results of operations of Cyclerion Therapeutics, Inc.
|
Date: July 29, 2021 |
By: |
/s/ Anjeza Gjino |
|
|
Name: |
Anjeza Gjino |
|
|
Title: |
Chief Financial Officer (Principal Financial and Accounting Officer) |