- Cyclerion Therapeutics, a Massachusetts-based drugmaker, is selling two of its main assets to a newly formed company in exchange for cash and equity.
- The as-yet unnamed “NewCo” was launched by certain Cyclerion shareholders, including CEO Peter Hecht, as well as new investors, who have collectively agreed to invest $81 million in it. The company will focus on treating diseases that arise when mitochondria — the microscopic organs that provide energy to cells — don’t work as they should.
- The deal announced Thursday has Cyclerion handing over its experimental drugs zagociguat and CY3018. Terms hold that Cyclerion will receive $8 million, reimbursement for all expenses related to the drugs during the period between the deal’s signing and close, and 10% equity ownership in the new company. It will also have the rights to additional, future purchases of the new company’s equity.
Cyclerion formed in April 2019 as a spinoff of Ironwood Pharmaceuticals. Its research revolved around therapies that stimulate sGC, or soluble guanylate cyclase, an enzyme that had already attracted interest from drugmakers as a target for heart and lung diseases. Cyclerion’s initial slate of drug programs sought to treat serious cardiovascular conditions, including heart failure, as well as neurological disorders and rare illnesses like sickle cell disease.
Yet, like many new biotechnology companies, Cyclerion hit setbacks. Its heart failure and sickle cell drugs each failed key clinical trials, which led the company to decide to out-license them.
Shares of Cyclerion, which traded at nearly $23 soon after the company officially launched, have lost most of their value in the years since. As of Friday morning, they were trading at about 26 cents apiece. In 2022, Cyclerion posted a net operating loss of $44 million.
“There is substantial doubt regarding our ability to continue as a going concern,” the company wrote in its latest annual earnings report, adding that management did not believe Cyclerion’s cash position at the end of 2022 would be enough to keep it operational for another year.
In early April, Cyclerion disclosed that its board of directors had, on March 17, received a non-binding proposal from an “entity formed by investors” that wanted to buy zagociguat and CY3018. The board consulted with legal and financial advisors and concluded the proposal warranted “further pursuit.”
Hecht, who is part of this entity, also agreed to make a $5 million equity investment in Cyclerion should the asset sale to the new company go through. Now that it has, Cyclerion expects the investment to happen on May 19, with Hecht receiving a mix of common stock and nonvoting convertible preferred stock.
Cyclerion has been evaluating zagociguat as a treatment for various neurological conditions. For example, a mid-stage clinical trial is currently testing the drug in patients with Alzheimer’s disease who also have health issues related to their blood vessels.
The new company plans to continue Cyclerion’s work advancing zagociguat as a potential therapy for a rare condition known as MELAS.
As for CY3018, which is meant to target the central nervous system, Cyclerion believes the drug could be beneficial in neuropsychiatric diseases.