Cyclerion Therapeutics: This Spinoff Has Multiple Readouts Coming Up, Concerns Remain

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About: Cyclerion Therapeutics, Inc. (CYCN)
by: Jonathan Faison
Summary

Cyclerion Therapeutics is a recent spin off from Ironwood Pharmaceuticals.

Recent insider buys and key leadership appointment are possible green flags.

Multiple readouts for mid- and early-stage studies are expected later this year. Pipeline overview call on the 13th should help it gain some visibility as well.

Large market opportunities are being targeted (SCD, DN, HFpEF, etc.), and data from early studies has for the most part been positive.

Given current concerns (competition, more clarity on safety/tolerability profile) and need for more derisking data sets, I cannot recommend a pilot position at this time.

Cyclerion Therapeutics (CYCN) is a recent spin off from Ironwood Pharmaceuticals (IRWD) that caught my attention after President Mark Currie acquired over 270,000 shares (paid $14.81 for total of around $4 million). Keep in mind Mr. Currie already had received 51,648 shares via the actual spinoff itself. I should point out that Mr. Currie is the primary inventor of LINZESS (closing in on blockbuster status) and also led discovery/pharmacology for Celebrex and Lunesta (achieved around $3 billion and $1 billion of peak sales, respectively). It's a good sign that Mr. Currie was not the only one to buy shares, as Directors Amy Schulman and Terrance McGuire also picked up large stakes.

As part of this separation, Ironwood shareholders received one share of Cyclerion common stock for every 10 shares of Ironwood common stock held as of March 19th. This close Ironwood connection extends to Cyclerion's management team, with several key members having come over from the larger company (CEO, Head of Finance, Head of IR, Head of Strategy, etc.).

I'm well aware of spinoffs being a great place to hunt for high % gainers, not only in biotech but also in technology and other sectors as well. Let's take a closer look at this one.

Chart

Figure 1: CYCN daily advanced chart (Source: Finviz)

When looking at charts, clarity often comes from taking a look at distinct time frames in order to determine important technical levels to get a feel for what's going on. Given Cyclerion's short trading history, chart reading isn't that helpful, but it's worth noting that the stock is showing relative stability and consolidation in the mid-teens.

Overview

Cyclerion bills itself as a company that is focused "on unlocking the full therapeutic potential of the NO-cGMP pathway by advancing next-generation soluble guanylate cyclase (SGC) stimulators that can address a broad range of serious and orphan diseases". It currently sports a market capitalization of just over $400 million and has multiple mid- and early-stage product candidates in the clinic.

Figure 2: Pipeline (Source: Corporate presentation)

Immediately it's worth noting that several data readouts are expected in the second half of the year. This key physiological control pathway being targeted (NO-cGMP) already has significant clinical validation, given that there are several approved therapies which have proved very successful commercially (NO donors, PDE5 inhibitors, sGC stimulator, etc.). Management believes the company will have success as it is pioneering next-generation sGC stimulators uniquely designed to target tissues relevant to the diseases it seeks to treat.

For lead program olinciguat in sickle cell disease (SCD), the drug candidate is an oral, once-daily sGC stimulator that distributes to vasculature and highly perfused organs. Preclinical data has shown positive effects on blood flow and vascular inflammation, and thus it's hypothesized that olinciguat could treat SCD by reducing proportion of sickled cells, decreasing vascular inflammation and cell adhesion, and improving local blood flow.

Figure 3: Solution for addressing SCD with olinciguat (Source: Corporate presentation)

As one can imagine, the market opportunity here is quite large with over 100,000 patients in the US and 50,000 in Europe. If olinciguat can truly improve daily symptoms, reduce anemia, reduce vaso-occlusive crises and preserve organ function, it would potentially be a gamechanger (remains to be seen how it would fit into currently evolving landscape with multiple, promising late-stage programs nearing approval or pivotal results).

Phase 1 data showed dose-proportional pharmacokinetics with profile supportive of once-daily dosing, while the drug candidate was generally well-tolerated with no serious adverse events or discontinuations due to adverse events. It should be pointed out that in the single ascending dose study, 7 of 18 subjects reported headache, three reported tachycardia/sinus tachycardia, three reported nausea, and three reported vomiting (all mild to moderate). In the multiple-ascending dose study, 7 of 40 treated patients reported tachycardia and three with hypotension during the first seven days (all mild to moderate).

The phase 2 STRONG study is enrolling 88 SCD patients at low, mid and high doses with exploratory endpoints (to "enable decision making" or decide whether program merits moving on to next stage) include biomarkers of disease activity (HbF levels, anemia, inflammatory markers) and health-related patient-reported outcomes including areas such as chronic pain and fatigue.

As for the next drug candidate, praliciguat, for diabetic nephropathy and Heart Failure w/ Preserved Ejection Fraction (HFpEF), management intends to outlicense the program after phase 2 data. Preclinical models have shown that this once-daily, oral sGC stimulator has extensive distribution to certain target tissues including kidney, heart, liver and adipose tissue. It appears adequately suited to these two conditions as it reduces inflammation and fibrosis while enhancing blood flow to these tissues. The market potential here is quite large (large phase 3 studies would be required, which is why management wisely has chosen global outlicensing pending data).

Prior phase 1 data showed no serious adverse events, but 11 of 35 praliciguat-treated subjects reported headache, five with tachycardia and four reported vomiting (all mild to moderate except for one adverse vomiting event). Keep in mind that as this was dose escalation study, most instances of headache and all cases of vomiting occurred at doses deemed not tolerated. Likewise, six reported cases of dizziness occurred mainly at higher dose levels. In exploratory phase 2a studies, there was a single serious adverse event of upper gastrointestinal hemorrhage deemed severe and drug related (to be fair, patient had ulcerative esophagitis and a previously undiagnosed hiatal hernia and patient recovered completely).

Figure 4: Results for exploratory phase 2 study in T2DM patients with hypertension who received praliciguat on top of standard of care for two weeks (Source: Corporate presentation)

Consider that there are over 400 million adults with diabetes globally with up to 40% of these patients having diabetic nephropathy. As for HFpEF, consider that it accounts for nearly half of heart failure hospitalizations with no approved therapies and five-year mortality rates ranging from 55% to 74% (significant unmet need). Preclinical data (taken with a grain of skepticism) was intriguing, showing preservation of cardiac function, lower cardiac hypertrophy and lower levels of inflammation biomarkers in rat models.

Taking the time to look at one final program, IW-6463 is the first and only CNS penetrant sGC stimulator for treatment of neurodegenerative diseases (preclinical data showed effects on cerebral blood flow, neuroinflammation, neuroprotection and neuronal function). A phase 1 trial is ongoing to potentially demonstrate proof of pharmacology with data expected later this year (utilizing single and multiple ascending doses).

Let's move on to select recent events.

Select Recent Developments & Other Information

On February 26th, the company announced that it'd secured commitments of $175 million from existing Ironwood shareholders, new investors, and certain members of future Cyclerion management (green flag). Credit Suisse and J.P. Morgan served as joint placement agents for the Cyclerion offering.

On April 9th, the company announced that Andreas (Andy) Busch, Ph.D., was appointed chief innovation officer (CIO). Prior he led R&D at Shire (NASDAQ:SHPG) and served as executive vice president and head of drug discovery at Bayer (OTCPK:BAYZF). In ROTY we point out that such high-profile hirings also serve as green flags (potentially positive indicators).

Per the company's S-1 filing, net loss for 2018 was $115 million (increase of around 20%). Research and development expenses totaled $87.7 million, while G&A came in at $27.5 million. While it had minimal assets prior to the $175 million financing, keep in mind the funds received provide it a year and a half or so of operational runway (not to mention that most of the work has been done for praliciguat studies and after upcoming data licensing deals are expected).

As for future catalysts of note, as mentioned above, we can look forward to multiple study readouts in the second half of the year. May 13th the company should gain some more visibility on its scheduled overview and pipeline overview call.

As for institutional investors of note, MFN Partners recently disclosed a 5.5% stake in the company. Per S-1 filing, it's a bit discouraging to see other members of leadership own so little of the company's stock and a number of funds sell their shares in the recent financing (Artal International, Bridger Healthcare, Camber Capital, etc.).

Final Thoughts

To conclude, while initially excited at the prospect of digging into this spin-off due to multiple near-term data readouts and some significant insider buying, this still appears to be a "wait and see" story.

Dilution in the medium term (end of 2019 or 1H 2020) is expected given current cash burn and balance sheet, but this could change if the company successfully outlicenses a program or strikes a lucrative partnership. Difficulty enrolling subjects for indications that have other promising treatments available, reliance on third parties to conduct studies and safety/tolerability concerns (Bayer's Adempas or riociguat comes to mind) are other factors to consider. The company already has decent IP with 10 issued US patents and 21 pending patent applications. As for competition, keep in mind Bayer's riociguat has been approved for PAH and CTEPH and Bayer/Merck (NYSE:MRK) are also evaluating sGC product candidates for a number of indications. For SCD Global Blood Therapeutics (NASDAQ:GBT), Novartis (NYSE:NVS), Pfizer (NYSE:PFE), bluebird bio (NASDAQ:BLUE) and others are likely to take much of the market before the company's drug candidate even makes it to approval (if it does).

For our purposes in ROTY, I might revisit after phase 2 readouts later this year. That said, I'm not particularly interested in market opportunities that already have significant competition and/or are crowded, instead opting for orphan opportunities with few approved therapies.

Author's Note: I greatly appreciate you taking the time out of your day to read my material and hope you found it to be helpful in some form or fashion. If you're willing, I look forward to interacting with you in the Comments Section. Whether bull, bear or simply a skeptic, we all typically have something worth saying and feedback (plus community-driven due diligence) is one of the reasons I enjoy writing. Have a good one!

Disclosure: I am/we are long GBT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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