{"url_path":"/sec/cycn/10-q/2026/item-2","section_key":"item-2","section_title":"Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-12","source_url":"https://www.sec.gov/Archives/edgar/data/1755237/0001193125-26-219478-index.html","accession_number":"0001193125-26-219478","cik":"0001755237","ticker":"CYCN","issuer_name":"Korsana Biosciences, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1755237/0001193125-26-219478-index.html","primary_entity_key":"0001755237","primary_entity_name":"Cyclerion Therapeutics, Inc."},"word_count":7440,"has_tables":true,"body_markdown":"Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations\n\nForward-Looking Information\n\nThe following discussion of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the corresponding notes included in this Quarterly Report on Form 10-Q, as well as the audited condensed consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. 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 Part II, Item 1A of this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements.\n\nOverview and Recent Developments\n\nWe have focused on building a pipeline of innovative therapeutics to address serious neuropsychiatric disorders with significant unmet medical need. Our current strategic focus prior to the announcement of the Merger Agreement was centered on the development of a novel therapeutic approach for neuropsychiatric conditions, with the lead indication being treatment-resistant depression (“TRD”), which we believe represents a substantial clinical and commercial opportunity. Over the past year, we refined our strategic direction toward programs that combine established pharmacologic agents with enabling technologies designed to improve precision, reproducibility, and patient outcomes. As part of this strategy, Cyclerion has evaluated multiple opportunities and prioritized CYC-126, an individualized therapy for TRD as our foundational development program.\n\nIn September 2025, we entered into a license agreement with the Massachusetts Institute of Technology (“MIT”) for intellectual property supporting this TRD program. In January 2026, we also entered into a collaboration and option-to-license agreement with Medsteer SAS (“Medsteer”), a developer of anesthesia delivery and monitoring technologies. This agreement provides Cyclerion with access to Medsteer’s technical expertise, data assets, and intellectual property relating to technology-enabled drug delivery and physiological monitoring, and grants us the right, but not the obligation, to obtain additional rights under specified conditions. We intend to evaluate these capabilities as part of our broader development strategy for our TRD program. Given the substantial unmet medical need in TRD, the stage of clinical development, and the potential commercial opportunity, we believe this program has commercial promise. Due to cash limitations, we have suspended efforts advancing an integrated clinical, regulatory, and commercial strategy for this TRD program.\n\nIn parallel with the advancement of our neuropsychiatric strategy, Cyclerion continues to seek opportunities to monetize our legacy soluble guanylate cyclase (“sGC”) stimulator assets, including potential collaborations, monetization opportunities, or other strategic transactions intended to maximize shareholder value.\n\nThe Merger Agreement\n\nOn April 1, 2026, Cyclerion entered into a Plan of Merger and Reorganization (as amended, the “Merger Agreement”) with Korsana Biosciences, Inc. (“Korsana”), a privately held biotechnology company discovering and developing novel therapies to reduce the burden of neurodegenerative diseases, pursuant to which among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Cariboos Merger Sub Corp., a Delaware corporation (“First Merger Sub”), will merge with and into Korsana, with Korsana continuing as a wholly owned subsidiary of Cyclerion and the surviving corporation of the merger (the “First Merger”), and Korsana will merge with and into Cariboos Merger Sub II, LLC, a Delaware limited liability company (“Second Merger Sub” and together with First Merger Sub, “Merger Subs”), with Second Merger Sub being the surviving entity of the merger (the “Second Merger” and, together with the First Merger, the “Merger”). After the completion of the Merger, Second Merger Sub will change its corporate name to “Korsana Biosciences Operating Company, LLC” and Cyclerion will change its name to “Korsana Biosciences, Inc.” Cyclerion following the Merger is referred to herein as the “Combined Company.” Cyclerion anticipates that the Merger will close in the third quarter of 2026, subject to certain closing conditions, along with the concurrent Korsana Pre-Closing Financing described below. Following the Merger, the current business of Korsana will become the primary business of Cyclerion.\n\nAt the closing of the First Merger (the “First Effective Time”, and the date on which the closing of the Merger occurs, the “Closing Date”), upon the terms and subject to the conditions set forth in the Merger Agreement:\n\n \n\n22\n\n \n\n(i) each then-outstanding share of common stock, $0.0001 par value per share, of Korsana (the “Korsana Common Stock”) and Series A Preferred Stock, $0.0001 par value per share of Korsana (“Korsana Series A Preferred Stock”) (including shares of Korsana Common Stock issued in the Korsana Pre-Closing Financing described below), excluding any shares to be cancelled pursuant to the Merger Agreement and excluding dissenting shares, will be automatically converted solely into the right to receive a number of shares of Cyclerion common stock, no par value per share (the “Cyclerion Common Stock”), equal to the exchange ratio as described in the Merger Agreement (the “Exchange Ratio”); provided, that in the event the aggregate number of shares of Cyclerion Common Stock issuable to a holder of Korsana capital stock (when aggregated with all of the shares of the Cyclerion Common Stock outstanding then beneficially owned by such person and its affiliates (as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3 promulgated thereunder) immediately after giving effect to the issuance of the merger consideration) would result in the issuance of shares of Cyclerion Common Stock to a holder in excess of a specified percentage (initially set at a percentage up to 9.99%) of the total outstanding shares of Cyclerion Common Stock (such specified percentage, a “Beneficial Ownership Limitation”), then Cyclerion will issue to any such holder (x) shares of Cyclerion Common Stock up to such holder’s Beneficial Ownership Limitation and (y) in lieu of any shares in excess of such holder’s Beneficial Ownership Limitation, pre-funded warrants (“Cyclerion Pre-Funded Warrants”) to purchase a number of shares of Cyclerion Common Stock upon exercise of such Cyclerion Pre-Funded Warrants equal to such excess shares; (ii) each then-outstanding share of Korsana Series Seed Preferred Stock, $0.0001 par value per share (“Korsana Series Seed Preferred Stock” and, together with the Korsana Series A Preferred Stock, the “Korsana Preferred Stock”), excluding any shares of Korsana Series Seed Preferred Stock to be cancelled pursuant to the Merger Agreement and any dissenting shares, will be converted into the right to receive a number of shares of Cyclerion Series B non-voting convertible preferred stock, no par value per share (“Cyclerion Series B Preferred Stock”), equal to the Exchange Ratio divided by 1,000; (iii) each then-outstanding option (a “Korsana Option”) to purchase shares of Korsana Common Stock will be converted into and become an option to purchase shares of Cyclerion Common Stock on the existing terms and conditions (including with respect to vesting and accelerated vesting), subject to adjustment as set forth in the Merger Agreement; (iv) each then-outstanding restricted stock unit for shares of Korsana Common Stock will be converted into and become a restricted stock unit for shares of Cyclerion Common Stock on the existing terms and conditions (including with respect to vesting and accelerated vesting), subject to adjustment as set forth in the Merger Agreement; and (v) each then-outstanding warrant to purchase shares of Korsana Common Stock will be converted into a warrant to purchase shares of Cyclerion Common Stock on the existing terms and conditions, subject to adjustment as set forth in the Merger Agreement.\n\nEach share of Cyclerion Common Stock and Cyclerion Series A Preferred Stock that is issued and outstanding at the First Effective Time will remain issued and outstanding and such shares, subject to the proposed reverse stock split, will be unaffected by the Merger. Prior to the First Effective Time, the Cyclerion board of directors will accelerate the vesting of all options to purchase shares of Cyclerion Common Stock (“Cyclerion Options”) and all restricted stock awards (“Cyclerion RSAs”). Each outstanding Cyclerion Option with an exercise price per share equal to or less than the volume weighted average closing trading price of a share of Cyclerion Common Stock on The Nasdaq Stock Market LLC (“Nasdaq”) for the five consecutive trading days ending three trading days prior to the Calculation Date (as defined in the Merger Agreement), as reported by Bloomberg L.P. (the “Cyclerion Closing Price”), will be cancelled at the First Effective Time and such holder thereof will receive an amount in cash, without interest, less any applicable tax withholding, equal to the product obtained by multiplying the excess of the Cyclerion Closing Price over the exercise price per share of the Cyclerion Common Stock underlying such Cyclerion Option by the number of shares of the Cyclerion Common Stock underlying such Cyclerion Option. Each Cyclerion Option with an exercise price greater than the Cyclerion Closing Price will be cancelled for no consideration. The vesting of each Cyclerion RSA will be accelerated in full.\n\nBased on Cyclerion’s capitalization as of December 31, 2025 and Korsana’s capitalization as of March 31, 2026 and assuming Cyclerion’s net cash as of closing being equal to $0, each share of Korsana Common Stock and Korsana Series A Preferred Stock is currently estimated to be entitled to receive approximately 1.1009 shares of Cyclerion Common Stock. Each share of Korsana Series Seed Preferred Stock will be converted into the right to receive a number of shares of Cyclerion Series B Preferred Stock, equal to the Exchange Ratio divided by 1,000. The estimated Exchange Ratio does not give effect to the proposed Cyclerion reverse stock split and is subject to adjustment based on Cyclerion’s estimated net cash at the closing of the First Merger.\n\nIn connection with the Merger, on April 1, 2026, Korsana entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain institutional and accredited investors for the purchase of shares of Korsana Common Stock and Pre-Funded Warrants to purchase shares of Korsana Common Stock (the “Korsana Pre-Funded Warrants”) for an aggregate purchase price of approximately $380.0 million, immediately prior to the closing of the Merger (referred to herein as the “Korsana Pre-Closing Financing”). The shares of\n\n \n\n23\n\n \n\nKorsana Common Stock and Korsana Pre-Funded Warrants that are issued in the Korsana Pre-Closing Financing will be converted into the right to receive a number of shares of Cyclerion Common Stock and Cyclerion Pre-Funded Warrants, respectively, equal to the Exchange Ratio. Korsana and the investors participating in the Korsana Pre-Closing Financing have also agreed to enter into a registration rights agreement at the closing of the Korsana Pre-Closing Financing, pursuant to which, among other things, the Combined Company will agree to provide for the registration and resale of certain shares of Korsana Common Stock that are held by the investors participating in the Korsana Pre-Closing Financing from time to time pursuant to Rule 415 under the Securities Act.\n\nBased on its current operating plan, Cyclerion expects that its current cash and cash equivalents will fund its operations until the closing of the contemplated Merger, which is subject to approval by its shareholders and the shareholders of Korsana and other customary closing conditions; however, Cyclerion has based this estimate on assumptions that may prove to be wrong, and Cyclerion could use its capital resources sooner than Cyclerion expects.\n\nCyclerion CVR Agreement\n\nAt or prior to the first merger, Cyclerion will enter into a Contingent Value Rights Agreement (the “CVR Agreement”) with a designated rights agent (the “Rights Agent”), pursuant to which Cyclerion’s pre-merger shareholders will receive one contingent value right (each a “CVR”) for each outstanding share of Cyclerion Common Stock and Cyclerion Series A Preferred Stock held by such shareholder on such date. Each CVR will represent the contractual right to receive certain net proceeds, if any, derived from any consideration that is paid to Cyclerion as a result of the disposition of Cyclerion’s pre-Merger legacy assets, net of any indemnity obligations, transaction costs and certain other expenses, during the period beginning on the date of the closing of the merger and ending (i) with respect to the sale, transfer, license or other disposition of all pre-merger legacy assets other than those pre-merger legacy assets described in the following clauses (ii) and (iii), upon the second (2nd) anniversary of the Closing Date, (ii) with respect to Cyclerion’s right to receive payments under that certain License Agreement, dated June 3, 2021, between Cyclerion and Akebia Therapeutics, Inc. (the “Akebia License Agreement”), the earlier of (A) the fifteenth (15th) anniversary of the date of entry into the CVR Agreement and (B) the expiration or earlier termination by Akebia Therapeutics, Inc. of the Akebia License Agreement pursuant to its terms, and (iii) with respect to the sale, transfer or other disposition of the equity interests of Tisento that were acquired by Cyclerion pursuant to that certain Asset Purchase Agreement, dated May 13, 2023, by and among Cyclerion, Tisento and JW Cycle, Inc., the earliest of (A) nine (9) months following the date of the consummation of Tisento’s initial public offering pursuant to a registration statement filed with, and declared effective by, the Securities and Exchange Commission pursuant to the Securities Act, (B) the sale of Tisento, and (C) the seventh (7th) anniversary of the Closing Date.\n\nThe contingent payments under the CVR Agreement, if they become payable, will become payable to the Rights Agent for subsequent distribution to the holders of the CVRs. In the event that no such proceeds are received, holders of the CVRs will not receive any payment pursuant to the CVR Agreement. There can be no assurance that any holders of CVRs will receive any payments with respect thereto.\n\nFinancial Overview\n\nResearch and Development Expense. Research and development expenses are incurred in connection with the discovery and development of our product candidates. These expenses consist primarily of the following costs: compensation, benefits and other employee-related expenses, research and development-related facilities, third-party contracts relating to manufacturing, nonclinical studies, clinical trial activities. All research and development expenses are charged to operations as incurred.\n\nPraliciguat is an orally administered, once-daily systemic sGC stimulator. On June 3, 2021, we entered into a license agreement with Akebia relating to the exclusive worldwide license to Akebia of our rights to the development, manufacture, medical affairs and commercialization of pharmaceutical products containing praliciguat and other related products and forms thereof enumerated in such agreement. In 2021, Akebia paid a $3.0 million upfront payment to us upon signing of the license agreement.\n\nOn December 13, 2024, we announced that Cyclerion and Akebia re-negotiated a mutually beneficial amendment to Akebia's exclusive license agreement for praliciguat. Under this new license amendment, we received $1.75 million in amendment payments, of which $1.25 million was paid in December 2024 and an additional payment of $0.5 million was paid in September 2025. In addition, Akebia is responsible for all intellectual property expenses associated with praliciguat at an earlier date than as originally agreed between the parties. On December 1,\n\n \n\n24\n\n \n\n2025, Akebia publicly announced that it has recently initiated Phase 2 clinical trials for the treatment of focal segmental glomerulosclerosis (“FSGS”) using praliciguat. Pursuant to the terms of amendment, upon initiation (defined as first patient dosed) of a Phase 2 clinical trial in the U.S. for a product, a $1.0 million development milestone payment would be due to us and the payment was received in February 2026. We are eligible to receive additional milestone cash payments of up to approximately $557.5 million in total related to potential future development, regulatory, and commercialization milestone payments for praliciguat. In exchange for a reduction in certain development milestone payments, we are eligible to receive certain higher-tiered sales-based royalties ranging from mid-single-digits to twenty percent.\n\nIn September 2025, we entered in a Material Purchase Agreement (the “Purchase Agreement”) with Akebia relating to purchase additional development materials (the “Additional Development Materials”) by Akebia for Akebia's use pursuant to the license agreement. Akebia paid $0.8 million to us for the purchase during the year ended December 31, 2025 and the Additional Development Materials were delivered to Akebia as of December 31, 2025 and we recognized revenue of $0.8 million during the year ended December 31, 2025.\n\nOlinciguat is a Phase 2, orally administered, once-daily, vascular sGC stimulator. On July 22, 2024, we entered into an Option to License Agreement (the “Option Agreement”) with a third party (the “Optionee”), pursuant to which the Optionee had an option (the “Option”) to enter into an exclusive license to olinciguat for human therapeutics, subject to certain carveouts. Under the terms of the Option Agreement, the Optionee paid us an Option fee of $150,000 in August 2024 and subsequent fees totaling $80,000 to extend the term of the Option Agreement. The Optionee originally could exercise the Option on or before March 20, 2025, which option period was ultimately extended through August 22, 2025. Thereafter, the parties had an additional 60 days to negotiate the terms of a definitive license agreement. The parties were unable to agree upon the terms of a license agreement and we were provided notice on October 23, 2025 that it was terminating the Option Agreement. We are currently exploring potential license opportunities for olinciguat.\n\nZagociguat and CY3018 are orally administered CNS-penetrant sGC stimulators. On July 28, 2023, Tisento purchased zagociguat and CY3018 in exchange for $8.0 million in cash consideration, $2.4 million as reimbursement for certain operating expenses related to zagociguat and CY3018 for the period between signing and closing of the transaction, and 10% of all of Tisento Parent's outstanding equity securities at the time of closing. Research and development expenses decreased significantly after July 28, 2023, due to sale of the Transferred Assets which resulted in a reduction of research and development efforts.\n\nOn January 27, 2025, Tisento announced that the first patient had been dosed in its global Phase 2b PRIZM study. The study is investigating the impact of once-daily oral zagociguat treatment on fatigue, cognitive impairment, and other key aspects of the rare mitochondrial disease MELAS (Mitochondrial Encephalomyopathy, Lactic Acidosis, and Stroke-like Episodes). On June 17, 2025, Tisento announced that the U.S. Food and Drug Administration (FDA) has granted Fast Track designation to zagociguat for the treatment of MELAS.\n\nPRIZM – a Phase 2b Randomized, Placebo-Controlled Trial Investigating Zagociguat in MELAS – is evaluating the efficacy and safety of oral zagociguat 15 mg or 30 mg compared to placebo when administered once-daily for 12 weeks in participants with genetically and phenotypically defined MELAS. The PRIZM study has a crossover design, with two 12-week treatment periods separated by a 4-week washout period. All participants will receive zagociguat during one of the 12-week periods and placebo during the other. Participants who complete the study may be eligible for an open-label extension study. PRIZM is a global study with plans to enroll approximately 44 participants at mitochondrial disease centers of excellence in the U.S., Italy, Germany, United Kingdom, Australia, and Canada. Tisento announced its first patient was dosed in the study in January 2025. In August 2025, Tisento announced that the first patient was enrolled in Tisento's open-label extension study in MELAS and in January 2026, Tisento announced that it completed enrollment in PRIZM. Further information regarding the study is available at ClinicalTrials.gov (NCT06402123).\n\nOn September 19, 2025, Cyclerion and the Massachusetts Institute of Technology (“MIT”) entered into a Patent License Agreement (the “MIT License Agreement”) pursuant to which MIT granted to us an exclusive worldwide license to develop and commercialize products using certain technology for the treatment of neuropsychiatric disorders, such as depression, in humans. Under the MIT License Agreement, we paid a nominal upfront license fee and patent reimbursement fee. Thereafter, we are also required to pay MIT a nominal annual license maintenance fee. This annual license maintenance fee is nonrefundable; however, the license maintenance fee may be credited to royalties earned during the same calendar year, if any. License maintenance fees paid in excess of royalties due in such calendar year shall not be creditable to amounts due for future years. Under the terms\n\n \n\n25\n\n \n\nof the MIT License Agreement, MIT will be eligible to receive up to $4.4 million upon the achievement of certain development, regulatory and sales milestone payments. MIT will also receive tiered royalties in a range of percentages in the low single digits based on future net sales of licensed products as set forth in the MIT License Agreement. Further, we are required to pay MIT varying percentages of income received as consideration for any sublicenses granted pursuant to the MIT License Agreement depending on the circumstances of the sublicense and the development milestones of sublicensed products. The term of the MIT License Agreement will expire in its entirety upon the expiration of certain patent rights for the licensed patents, unless earlier terminated by the parties in accordance with the terms of the MIT License Agreement. We recorded research and development expense of $0.1 million for the year ended December 31, 2025, which consisted of upfront fees, patent reimbursement fees and transaction costs related to the license.\n\nOn January 3, 2026, we and Medsteer SAS (“Medsteer”) entered into a Collaboration and Option Agreement (the “Collaboration Agreement”) pursuant to which Medsteer granted to us (i) a non-exclusive, worldwide, royalty-free, sublicensable license of certain of Medsteer’s technology, software and intellectual property to develop an anesthetic delivery system with Medsteer and (ii) an exclusive option (the “Option”), exercisable at our sole discretion, to obtain an exclusive, worldwide, royalty-bearing, sublicensable license of certain of Medsteer’s technology, software and intellectual property to develop or commercialize licensed products in any field of use except for sedation regulation for patients undergoing major surgery, in multi-bed or intensive unit wards, or in the context of medical transport. We may exercise the Option at any time until the earlier of the second anniversary of the effective date of the Collaboration Agreement, which period may be extended for an additional two years at our option and upon payment of a nominal fee or by mutual agreement of us and Medsteer.\n\nUnder the terms of the Collaboration Agreement, the Company will pay to Medsteer a nominal upfront payment, a payment upon exercise of the Option, and Medsteer will be eligible to receive up to $3.7 million upon the achievement of certain development, regulatory and sales milestone payments. Medsteer will also receive an annual royalty payment and royalties in a percentage in the low single digits based on future net sales of licensed products, subject to certain adjustments as set forth in the Collaboration Agreement.\n\nWe continue to evaluate other activities aimed at enhancing shareholder value, which may potentially include collaborations, licenses, mergers, acquisitions, and/or other targeted investments.\n\nThe following table summarizes our research and development expenses, employee and facility related costs allocated to research and development expense, and discovery and pre-clinical phase programs, for the three months ended March 31, 2026 and 2025. The product pipeline expenses relate primarily to external costs associated with nonclinical studies.\n\n \n\n \n\n \n\nThree Months Ended\nMarch 31,\n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n \n\n(in thousands)\n\n \n\nPersonnel and related internal costs\n\n \n\n$\n\n7\n\n \n\n \n\n$\n\n12\n\n \n\nOthers\n\n \n\n \n\n723\n\n \n\n \n\n \n\n24\n\n \n\nTotal research and development expenses\n\n \n\n$\n\n730\n\n \n\n \n\n$\n\n36\n\n \n\n \n\nSecuring regulatory approvals for new drugs is a lengthy and costly process. Any failure by us or our partners to obtain, or any delay in obtaining, regulatory approvals would materially adversely affect our product candidate development efforts and our business overall.\n\nGiven 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.\n\nIf we continue to progress the development of our product candidates, the successful development of any current or potential future product candidates is highly uncertain and subject to a number of risks.\n\n \n\n26\n\n \n\nWe are unable to determine the duration and costs to complete current or future nonclinical and clinical stages of any current or potential future product candidates, including as licensed to third parties, or when, or to what extent, we may generate revenues from the commercialization and sale of any current or potential future product candidates. Development timelines, probability of success and development costs vary widely. We anticipate that we will make determinations as to which additional programs to pursue and how much funding to direct to each program on an ongoing basis in response to the data from the studies of each product candidate, the competitive landscape and ongoing assessments of such product candidate’s commercial potential.\n\nGeneral and Administrative Expense. General and administrative expenses consist primarily of compensation, benefits and other employee and non-employee related expenses for personnel in our administrative, finance, legal, information technology, business development, and human resource functions. Other costs include the legal costs of pursuing patent protection of our intellectual property, insurance costs and professional fees for accounting and legal services. We record all general and administrative expenses as incurred.\n\nCritical Accounting Policies and Estimates\n\nOur discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements prepared in accordance with 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.\n\nWe 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2025.\n\nAll 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. A discussion of our critical accounting policies and estimates may be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations under the heading Critical Accounting Policies and Estimates.\n\nResults of Operations\n\nThe revenue and expenses reflected in the consolidated financial statements may not be indicative of revenue and expenses that will be incurred by us in the future. The following discussion summarizes the key factors we believe are necessary for an understanding of our consolidated financial statements.\n\n \n\n27\n\n \n\n \n\n \n\n \n\n \n\nThree Months Ended\nMarch 31,\n\n \n\n \n\nChange\n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n$\n\n \n\n \n\n%\n\n \n\n \n\n \n\n(dollars in thousands)\n\n \n\nRevenues:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nRevenue from option agreement\n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n81\n\n \n\n \n\n$\n\n(81\n\n)\n\n \n\n \n\n(100\n\n)%\n\nTotal revenues\n\n \n\n \n\n—\n\n \n\n \n\n \n\n81\n\n \n\n \n\n \n\n(81\n\n)\n\n \n\n \n\n(100\n\n)%\n\nCost and expenses:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nResearch and development\n\n \n\n \n\n730\n\n \n\n \n\n \n\n36\n\n \n\n \n\n \n\n694\n\n \n\n \n\n \n\n1928\n\n%\n\nGeneral and administrative\n\n \n\n \n\n2,479\n\n \n\n \n\n \n\n1,502\n\n \n\n \n\n \n\n977\n\n \n\n \n\n \n\n65\n\n%\n\nTotal cost and expenses\n\n \n\n \n\n3,209\n\n \n\n \n\n \n\n1,538\n\n \n\n \n\n \n\n1,671\n\n \n\n \n\n \n\n109\n\n%\n\nLoss from operations\n\n \n\n \n\n(3,209\n\n)\n\n \n\n \n\n(1,457\n\n)\n\n \n\n \n\n(1,752\n\n)\n\n \n\n \n\n120\n\n%\n\nOther income, net\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nInterest income\n\n \n\n \n\n32\n\n \n\n \n\n \n\n28\n\n \n\n \n\n \n\n4\n\n \n\n \n\n \n\n14\n\n%\n\nTotal other income, net\n\n \n\n \n\n32\n\n \n\n \n\n \n\n28\n\n \n\n \n\n \n\n4\n\n \n\n \n\n \n\n14\n\n%\n\nNet loss and other comprehensive loss\n\n \n\n$\n\n(3,177\n\n)\n\n \n\n$\n\n(1,429\n\n)\n\n \n\n$\n\n(1,748\n\n)\n\n \n\n \n\n122\n\n%\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nRevenue\n\nRevenue from option agreement. On July 22, 2024, we entered into the Option Agreement with the Optionee, which the Optionee had the Option to enter into an exclusive license to olinciguat for human therapeutics, subject to certain carveouts. We recognized revenue of $0.1 million related to the Option extension fee and expense reimbursement during the three months ended March 31, 2025. The Option Agreement was terminated in October 2025 and no revenue was recognized during the three months ended March 31, 2026.\n\nExpenses\n\nResearch and development expense. The increase in research and development expense of approximately $0.7 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, was primarily driven by increases of approximately $0.6 million in professional consulting and approximately $0.1 million in license option fee.\n\nGeneral and administrative expense. The increase in general and administrative expenses of approximately $1.0 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily driven by increases of approximately $0.3 million in professional consulting and $0.9 million in corporate legal fees, offset by a decrease of $0.1 million in patent fees and $0.1 million in insurance expense.\n\nInterest income. Interest income was not changed significantly for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.\n\nLiquidity and Capital Resources\n\nTo date, we have been funded primarily from sales of our equity securities, payments received in connection with the sale of assets to Tisento, milestone payments from Akebia and an option to license payment.\n\nOn March 21, 2025, we closed on a private placement of 499,998 shares of our common stock, pursuant to a Stock Purchase Agreement, for total gross proceeds of approximately $1.375 million. We also incurred transaction costs of $0.1 million during the three months ended March 31, 2026.\n\nOn February 4, 2025, we filed a Registration Statement on Form S-3 (the “2025 Shelf”) with the securities and Exchange Commission (the “SEC”) in relation to the registration of common stock, preferred stock, warrants and units of any combination thereof for an aggregate initial offering price not to exceed $25.0 million. The amount we can sell under the 2025 Shelf, which was declared effective in February 2025, cannot exceed one-third of the value of our public float.\n\n \n\n28\n\n \n\nOn May 7, 2025, we entered into an “at the market” equity offering program (the “ATM Program”) pursuant to a Sales Agreement (the “2025 Sales Agreement”) by and between us and Guggenheim Securities LLC (“Guggenheim Securities”). Pursuant to the terms of the 2025 Sales Agreement, we could sell, from time to time, shares of our common stock, having an aggregate offering price of up to $20,000,000 from time to time through or to Guggenheim Securities, acting as our agent, subject to the application of General Instruction I.B.6 of Form S-3 (“Instruction I.B.6”) pertaining to primary offerings by certain registrants, including shares of common stock offered directly by the Company (the “ATM Shares”). To date, we have sold all ATM shares available under Instruction I.B.6. In light of the proposed Merger, we do not anticipate selling any additional ATM shares between now and the anticipated date of the first closing of the Merger. If the Merger is not consummated, we may consider recommencing sales of ATM Shares although there can no assurance that any such sales may be completed.\n\nWe intend to use the remaining net proceeds from the ATM Program for general corporate purposes until such time as the Merger is consummated.\n\nIn the event that the Merger is not consummated, and subject to the terms and conditions of the Sales Agreement, Guggenheim Securities will use its commercially reasonable efforts to sell the ATM Shares from time to time, based upon our instructions. We have provided Guggenheim Securities with customary indemnification rights, and Guggenheim Securities will be entitled to a commission of 3.0% of the gross proceeds of the ATM Shares sold under the Sales Agreement.\n\nFuture sales of the ATM Shares, if any, will be made pursuant to a previously filed and effective registration statement on Form S-3 (File No. 333-284690). ATM Shares may be offered only by means of a prospectus, including a prospectus supplement, forming a part of the effective registration statement. Sales of the ATM Shares, if any, will be made at market prices by any method that is deemed to be an “at the market” offering as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made directly on the Nasdaq Capital Market or any other trading market for our common stock. We have no obligation to sell any of the ATM Shares and may at any time suspend offers under the Sales Agreement or terminate the Sales Agreement.\n\nPursuant to Instruction I.B.6, in no event will we sell ATM Shares with a value exceeding more than one-third of our “public float” (the aggregate market value of our outstanding common stock held by non-affiliates) in any twelve-month period so long as our public float remains below $75.0 million. During the year ended December 31, 2025, we sold 715,220 ATM Shares for net proceeds of $2.1 million. On January 6, 2026, we sold 405,000 ATM Shares for net proceeds of $0.8 million. These sales exhausted our ability to sell additional ATM Shares during the first quarter of 2026 due to the limitations set forth in Instruction I.B.6.\n\nOn May 19, 2023, we sold 225,000 shares of our common stock, pursuant to a Common Stock Purchase Agreement, and 351,037 shares of Series A Preferred Stock, to our former CEO, for total gross proceeds of approximately $5 million. There were no material fees or commissions related to the transaction. Such Series A Convertible Preferred Stock is convertible into shares of our common stock on a one-to-one basis. Our shareholders approved such convertibility on July 19, 2023.\n\nOn July 28, 2023, we closed the transactions contemplated by the Asset Purchase Agreement receiving proceeds of $8.0 million as cash consideration, approximately $2.4 million as reimbursement for certain operating expenses related to zagociguat and CY3018 programs for the period between signing and closing of the transaction, and 10% of all of Tisento Parent’s outstanding equity securities.\n\nIf we are unable to complete the Merger, 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, if we continue to progress the development of our product candidates, 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. However, there can be no assurance that we would be successful in raising such funding.\n\nOn March 31, 2026, we had approximately $2.8 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\n\n \n\n29\n\n \n\n“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.\n\nGoing Concern\n\nWe evaluated whether there are conditions and events considered in the aggregate, which raise substantial doubt about our ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of our plans sufficiently alleviates substantial doubt about our ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. In performing our analysis, management excluded certain elements of our operating plan that cannot be considered probable. Under ASC 205-40, the future receipt of potential funding from future partnerships, equity or debt issuances, and the potential milestones from the Akebia agreement cannot be considered probable at this time because these plans are not entirely within our control and/or have not been approved by the Board of Directors as of the date of these consolidated financial statements.\n\nWe have incurred recurring losses since our inception, including a net loss of $3.2 million for the three months ended March 31, 2026. In addition, as of March 31, 2026, we had an accumulated deficit of $274.2 million. We expect that our cash and cash equivalents as of March 31, 2026, will be sufficient to fund operations into the third quarter of 2026, however we will need to obtain additional funding to sustain operations as we expect to continue to generate operating losses for the foreseeable future. Accordingly, we have concluded that substantial doubt exists about our ability to continue as a going concern.\n\nThe accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.\n\n \n\nCash Flows\n\nThe following is a summary of cash flows for the three months ended March 31, 2026 and 2025:\n\n \n\n \n\nThree Months Ended\nMarch 31,\n\n \n\n \n\nChange\n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\n$\n\n \n\n \n\n%\n\n \n\n \n\n \n\n(dollars in thousands)\n\n \n\nNet cash used in operating activities\n\n \n\n$\n\n(1,176\n\n)\n\n \n\n$\n\n(968\n\n)\n\n \n\n$\n\n(208\n\n)\n\n \n\n \n\n21\n\n%\n\nNet cash used in investing activities\n\n \n\n$\n\n(66\n\n)\n\n \n\n$\n\n—\n\n \n\n \n\n$\n\n(66\n\n)\n\n \n\n \n\n—\n\n \n\nNet cash provided by financing activities\n\n \n\n$\n\n825\n\n \n\n \n\n$\n\n1,375\n\n \n\n \n\n$\n\n(550\n\n)\n\n \n\n \n\n—\n\n \n\n \n\nCash Flows used in Operating Activities\n\nNet cash used in operating activities of $1.2 million for the three months ended March 31, 2026 was primarily a result of our $3.2 million net loss from operations. The net loss was offset by a decrease in accounts receivable of $1.0 million and an increase in accrued expenses and other current liabilities of $0.9 million.\n\nNet cash used in operating activities of $1.0 million for the three months ended March 31, 2025 was primarily a result of our $1.4 million net loss from operations. The net loss was offset by non-cash stock-based compensation expense of $0.1 million, a decrease in prepaid expenses of $0.2 million, an increase in accounts payable of $0.1 million and an increase in accrued expenses and other current liabilities of $0.1 million.\n\n \n\n30\n\n \n\n \n\nCash Flows used in Investing Activities\n\nNet cash used in investment activities of $0.1 million for the three months ended March 31, 2026 was due to purchase of lab equipment acquired during the three months ended March 31, 2026. There was no investing activity in the three months ended March 31, 2025.\n\nCash Flows provided by Financing Activities\n\nNet cash provided by financing activities for the three months ended March 31, 2026 of $0.8 million was due to the net proceeds received from ATM related to the issuance of 405,000 shares of our common stock under the ATM. Net cash provided by financing activities for the three months ended March 31, 2025 of $1.4 million was due to cash received from the 2025 Equity Private Placement related to issuance of 499,998 shares common stock at a purchase price of $2.75 per share.\n\nFunding Requirements\n\nIf we are unable to complete the Merger, we expect our expenses to fluctuate as we continue to maintain out-license opportunities and potentially seek to broaden our portfolio through in-licensing of complementary assets. We expect that our cash and cash equivalents as of March 31, 2026, will be sufficient to fund operations through the anticipated closing date of the Merger. As a result, if we are unable to complete the Merger, we will need to obtain additional funding to sustain operations as we expect to continue to generate operating losses for the foreseeable future. Failure to obtain necessary capital when needed would likely delay development of any current or potential future product candidates, and would likely make it difficult for us to continue our operations. Because there is substantial doubt about our ability to continue as a going concern for a reasonable period of time, an investment in our common stock is highly speculative; holders of our common stock could suffer a total loss of their investment.\n\nBecause 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 if the Merger is not consummated. 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:\n\n•\nscope, progress, results and costs of researching and developing our current and any potential future product candidates, and any preclinical studies and clinical trials we may conduct;\n\n•\ncosts, timing and outcome of regulatory review of any current and any potential future product candidates;\n\n•\ncosts of future activities, including medical affairs, manufacturing and distribution, of any current or potential future product candidates for which we receive marketing approval;\n\n•\ncost and timing of necessary actions to support our strategic objectives;\n\n•\ncosts of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; and\n\n•\ntiming, receipt and amount of sales of, or milestone payments related to or royalties on, our current or potential future product candidates, if any.\n\nA change in any of these or other variables with respect to the development of any current or potential future product candidates could significantly change the costs and timing of the development of that product candidate.\n\nOur future capital requirements will depend primarily on our ability to complete the Merger. If we do not complete the Merger and until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances or licensing arrangements with third parties, of which there can be no assurance. To the extent that we raise additional capital through the sale of equity or convertible debt securities, outstanding equity ownership may be materially diluted, and the terms of securities sold in such transactions could include liquidation\n\n \n\n31\n\n \n\nand other preferences and rights that adversely affect the rights of holders of common stock. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specified actions, such as incurring additional debt, making capital expenditures or declaring dividends. In addition, debt financing would result in increased fixed payment obligations.\n\nIf we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, as to which raise there can be no assurance, we may have to relinquish rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we do not complete the Merger and are unable to raise funds, we may need to cease operations.\n\nContractual Commitments and Obligations\n\nTax-related Obligations\n\nWe 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 March 31, 2026, we had no uncertain tax positions.\n\nOff-Balance Sheet Arrangements\n\nWe 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.\n\nNew Accounting Pronouncements\n\nFor 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."}