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Cyclerion Therapeutics, a renowned clinical-stage biopharmaceutical company, has recently made headlines with a significant strategic shift. The company has entered into a definitive agreement to sell key assets aimed at treating diseases associated with mitochondrial dysfunction. This marks a pivotal step in Cyclerion's journey, promising exciting developments across the biomedical field.
The Birth of a New Company
The decision stems from an agreement between Cyclerion and a newly formed private company, hereafter referred to as "NewCo". Cyclerion's assets, zagociguat (CY6463) and CY3018, will be transferred to NewCo. In return, the company will receive $8 million in cash and a 10% equity stake in NewCo. This strategic move will breathe new life into these assets, providing them with the focus and resources necessary for further development.
Investors' Role in The Agreement
NewCo has secured a commitment of $81 million from certain Cyclerion shareholders and new investors. This substantial investment will be used to advance the development of both zagociguat and CY3018, with a particular focus on MELAS and other diseases associated with mitochondrial dysfunction. Leading this investor syndicate are prominent names such as Venrock, J Wood Capital, and Sanofi Ventures, along with current Cyclerion stakeholders Invus and CEO Peter Hecht.
Financial Details of The Agreement
Under the terms of the agreement, Cyclerion will receive an $8 million cash payment upon closing. In addition, the company will be reimbursed for all expenses related to zagociguat and CY3018 incurred between the signing and closing of the transaction. The 10% equity ownership in NewCo is subject to anti-dilution protection up to a post-money valuation of $100 million. Cyclerion will also have additional future equity purchase rights in NewCo.
CEO's Equity Investment
The signing of the definitive agreement triggered an additional $5 million equity investment in Cyclerion by CEO Peter Hecht. This investment is scheduled to take place on May 19, 2023, with Hecht receiving a mix of common stock and nonvoting convertible preferred stock of Cyclerion at a minimum purchase price of $0.434 per share.
Cyclerion's Strategic Decision
This strategic move showcases Cyclerion's commitment to maximizing the value of their assets while delivering potentially life-changing medicines to patients. Errol De Souza, Chair of the Board at Cyclerion, expressed satisfaction at the deal, stating, "We are pleased to see our zagociguat and CY3018 assets attracting the capital and capabilities they will need to continue their development in mitochondrial and CNS diseases."
Implications for Cyclerion Shareholders
Cyclerion shareholders will benefit from this deal without any going-forward operational or financial obligations for these programs. They will share in future value creation via Cyclerion's equity position in NewCo. The current Cyclerion investors participating in NewCo's capitalization have agreed to vote their shares in favor of the transaction.
About Cyclerion Therapeutics
Cyclerion Therapeutics is a clinical-stage biopharmaceutical company developing treatments for serious diseases. Its portfolio includes novel sGC stimulators that modulate a key node in a fundamental signaling network in both the CNS and the periphery. These stimulators have the potential to impact a broad range of diseases.
Zagociguat and CY3018: The Assets in Focus
Zagociguat is a CNS-penetrant sGC stimulator that has shown rapid improvements across several disease activity domains, including mitochondrial disease-associated biomarkers. On the other hand, CY3018 is a CNS-targeted sGC stimulator in preclinical development. It preferentially localizes to the brain and has a pharmacology profile suggesting potential for the treatment of neuropsychiatric diseases and disorders.
The Future of Cyclerion Therapeutics
Cyclerion's strategic move marks a new chapter in its journey to develop groundbreaking treatments for serious diseases. While the company continues its work on other projects, the transfer of zagociguat and CY3018 to NewCo signals a renewed focus on mitochondrial and CNS diseases. The future certainly looks promising for Cyclerion and its shareholders.
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