Korsana Biosciences, Inc.

Current report

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the unaudited condensed consolidated financial statements and the related notes included in Part I - Item 1 of this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2026 (this "Quarterly Report"). This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") that reflect our current plans, forecasts, estimates and beliefs and involve risks and uncertainties. These forward-looking statements include, but are not limited to, express or implied statements regarding the Company’s expectations, hopes, beliefs, intentions or strategies regarding the future. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “could,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “seeks,” “target,” “endeavor,” “possible,” “potential,” “continue,” “contemplate” or the negative of these terms or other comparable terminology, but the absence of these words does not mean that a statement is not forward-looking. These forward-looking statements are based on current expectations and beliefs concerning future developments and their potential effects. There can be no assurance that future developments affecting the Company will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the Company’s control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Our actual results, outcomes and the timing of events could differ materially from those discussed in the forward-looking statements. Forward-looking statements are not historical facts, reflect our current views with respect to future events, and apply only as of the date made. We do not intend, and undertake no obligation, to update these forward-looking statements, except as required by law. References to “we,” “us,” “our,” “Korsana” or “the Company” refer to Korsana Biosciences, Inc. and its consolidated subsidiaries after the Merger, unless context otherwise requires.

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Overview

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We are a biopharmaceutical company developing therapeutics to treat neurodegenerative diseases beginning with Alzheimer’s disease (“AD”). Our lead product candidate, KRSA-028, is an anti-amyloid beta (“Aβ”) antibody that combines the proprietary Therapeutic Targeting (“THETA™”) platform with clinical and regulatory learnings from other anti-Aβ products that have achieved regulatory approval or are in late-stage clinical trials. KRSA-028 was designed to build upon the success of these prior products while addressing shortcomings that limit their clinical and commercial success, such as the ability to penetrate the brain. We believe that KRSA-028 has the potential to rapidly clear amyloid plaques resulting in meaningful impacts on clinical symptoms in AD patients, and to do so while avoiding adverse effects associated with the specific designs of prior products. After we complete clinical trial-enabling activities, we intend to submit a Clinical Trial Notification (“CTN”) in Australia or a Clinical Trial Application (“CTA”) in New Zealand by the end of 2026 and an Investigational New Drug (“IND”) application in the United States in the first quarter of 2027. Pharmacokinetic data in healthy volunteers is anticipated by mid-year 2027 and interim proof-of-concept data in Alzheimer’s disease patients is anticipated by year-end 2027 or the first quarter of 2028. The outcome of preclinical studies and early-stage clinical trials may not be predictive of the success of later clinical trials.

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AD is a progressive and devastating neurodegenerative disease that slowly destroys cognition and leads to progressive impairment in patients’ ability to conduct activities of daily living. Prevalence increases with age; up to one-third of people over age 85 have symptoms. There are seven million people suffering from AD in the United States, a number that is expected to double by 2050 due to an aging population. AD is the seventh-leading cause of death in the United States with an estimated 500,000 deaths every year.

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Until recently, approved treatments for AD addressed only symptoms and had no impact on the course of the disease. That situation changed after the approval of antibody-based therapeutics that targeted Ab. Clinical trials of these therapeutics have provided clear evidence that antibody-mediated depletion of Aβ in the brain correlates with a reduction in the rate of cognitive decline in symptomatic AD.

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KRSA-028 was designed using clinical and regulatory learnings from these pioneering antibody-based therapeutics, together with our proprietary combination of antibody engineering technologies, with the goal of improving clinical efficacy and safety profiles. KRSA-028 targets what is believed to be the most clinically relevant form of Aβ and is designed to improve brain uptake while reducing effects on reticulocytes. It was also designed with physicochemical properties and stability intended to enable potent anti-Aβ activity to the brain via subcutaneous injections. Key features of KRSA-028’s design include:

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Incorporating a proprietary transferrin receptor, or TfR, based shuttle designed to potentially improve delivery to the brain, which we believe may also help reduce or avoid the treatment-related complications known as amyloid-related imaging abnormalities, or ARIA, associated with the two approved disease-modifying therapies

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Targeting 3-pyroglutamate Ab, or 3pE-Ab, a form of Aβ that is enriched in amyloid plaques that is believed to contribute to plaque formation in AD

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Incorporating Fc domain modifications designed to potentially improve half-life and reduce the potential for hematologic adverse events seen with other antibodies that incorporate TfR-based shuttles, while potentially preserving antibody-mediated immune function believed to contribute to amyloid plaque clearance

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Enabling subcutaneous formulation through potentially favorable solubility, viscosity, and stability characteristics

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The proprietary THETA technology used to create KRSA-028 combines the benefits of TfR-mediated shuttling to the brain with Fc modifications to extend half-life and spare reticulocytes from destruction shown to be caused by third-party TfR-shuttled investigational products. The THETA technology was designed to retain phagocytic capacity, the mechanism by which the two approved disease-modifying products are thought to clear amyloid plaques from the brain. We believe that the THETA platform will lead to meaningful improvements in the ability to deliver therapeutic modalities, such as antibodies, to the brain, while minimizing the frequency of adverse events associated with other TfR-based shuttle systems.

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In addition to KRSA-028, we are advancing a pipeline of innovative therapies for neurodegenerative diseases. We anticipate disclosing details on our next product candidate in 2027.

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Since our inception in November 2024, we have devoted substantially all of our resources to raising capital, organizing and staffing the company, business and scientific planning, conducting discovery and research activities, establishing arrangements with third parties, and providing general and administrative support for these operations. We do not have any programs approved for sale and have not generated any revenue from product sales. To date, we have funded our operations primarily through proceeds from the issuance of convertible preferred stock and our $380.0 million proceeds from the Pre-Closing Financing (as defined and further described in"Recent Developments" below).

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We have incurred operating losses since inception. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of any programs we may develop. We incurred net losses of $46.4 million and $77.3 million for the three and nine months ended September 30, 2026. As of September 30, 2026, we had an accumulated deficit of $113.0 million.

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As of September 30, 2026, we had cash and cash equivalents of $456.2 million. We expect that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditures into 2029. We expect to continue to incur substantial losses for the foreseeable future, and our transition to profitability will depend upon successful development, approval and commercialization of our product candidates and upon achievement of sufficient revenues to support our cost structure.

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Recent Developments

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The Merger

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Immediately prior to the Closing of the Merger, Cyclerion effected a one-for-seven reverse stock split of its common stock. At the effective time of the Merger, outstanding shares of Pre-Merger Korsana common stock, including shares issued in connection with the Pre-Closing Financing, were exchanged for shares of Cyclerion common stock based on the Exchange Ratio. Pre-Merger Korsana Series Seed Preferred Stock was exchanged for Series B Non-Voting Convertible Preferred Stock, while Series A Preferred Stock was exchanged for common stock or, to the extent issuance would exceed a holder's beneficial ownership limitation of up to 9.99%, pre-funded warrants to purchase common stock. Outstanding stock options, restricted stock awards and warrants of Pre-Merger Korsana were also assumed or converted, as applicable, in accordance with the Merger Agreement. Additional information regarding the Merger, including the Exchange Ratio and treatment of outstanding equity instruments, is included in Note 1 to the unaudited condensed consolidated financial statements.

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The Merger was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Pre-Merger Korsana was deemed to be the accounting acquirer for financial reporting purposes. This determination was primarily based on the fact that, immediately following the Merger: (i) Pre-Merger Korsana stockholders own a substantial majority of the voting rights in the combined company; (ii) Pre-Merger Korsana's largest stockholders retain the largest interest in the combined company; (iii) Pre-Merger Korsana designated a majority of the initial members of the board of directors of the combined company; and (iv) Pre-Merger Korsana’s executive management team became the management team of the combined company. Accordingly, for accounting purposes: (i) the Merger was treated as the equivalent of Pre-Merger Korsana issuing stock to acquire the net assets of Cyclerion; and (ii) the reported historical operating results of the combined company prior to the Merger are those of Pre-Merger Korsana. Additional information regarding the Merger is included in Note 3 to the condensed consolidated financial statements included in Part I – Item 1 of this Quarterly Report.

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Pre-Closing Financing

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Immediately prior to the completion of the Merger, and in order to provide us with additional capital for our development programs, Pre-Merger Korsana entered into the Securities Purchase Agreement with certain institutional and accredited investors, pursuant to which Pre-Merger Korsana issued and sold 140,516,578 shares of Pre-Merger Korsana common stock and 20,171,961 pre-funded warrants, exercisable for 20,171,961 shares of Pre-Merger Korsana common stock, at a purchase price of $2.3648 per share and $2.3647 per warrant, in each case before giving effect to the Exchange Ratio, for an aggregate purchase price of $380.0 million in a private placement (the “Pre-Closing Financing”). At the Closing of the Merger, based on the Exchange Ratio, the Pre-Merger Korsana common stock and pre-funded warrants subscribed for were converted into the right to receive 29,143,142 shares of common stock and 4,183,665 pre-funded warrants. Shares of Pre-Merger Korsana common stock and pre-funded warrants to purchase shares of Korsana common stock issued pursuant to the Securities Purchase Agreement were converted into shares of Cyclerion common stock and pre-funded warrants to purchase shares of Cyclerion common stock at Closing per the Merger Agreement.

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Reverse Stock Split

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Immediately prior to the consummation of the Merger, Cyclerion effected a one-for-seven reverse stock split of its common stock, which became legally effective on September 8, 2026 (the "Reverse Stock Split"). The Company's common stock commenced trading on a post-Reverse Stock Split and post-Merger basis on September 9, 2026. In connection with the Merger, the Exchange Ratio was determined to be 0.2074 shares of Cyclerion common stock for each share of Pre-Merger Korsana common stock, which gives effect to the Reverse Stock Split. All references to common stock, options to purchase common stock, common stock share data, per share data, and related information in the condensed consolidated financial statements have been retrospectively adjusted to reflect the Exchange Ratio for all periods presented, unless otherwise indicated.

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Proposed Redomestication

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On October 15, 2026, we filed a definitive proxy statement (the “Proxy Statement”) for a special meeting of our shareholders to be held on November 13, 2026 (the “Special Meeting”) to approve the redomestication of the Company from the Commonwealth of Massachusetts to the Cayman Islands (the “Redomestication”). The Redomestication is conditioned on the approval of the Redomestication Proposal (as defined in the Proxy Statement) at the Special Meeting and will not be effected unless approved. See Part II – Item 1A. “Risk Factors – Risks Related to the Proposed Redomestication.”

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Impact of General Economic Risk Factors on Our Operations

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Uncertainty in the global economy presents significant risks to our business. We are subject to continuing risks and uncertainties in connection with the current macroeconomic environment, including increases in inflation, fluctuating interest rates, new or increased tariffs and other barriers to trade, changes to fiscal and monetary policy or government budget dynamics (particularly in the pharmaceutical and biotech areas), bank failures, geopolitical factors, including the ongoing conflicts between Russia and Ukraine and in the Middle East and the responses thereto, and supply chain disruptions. While we are closely monitoring the impact of the current macroeconomic and geopolitical conditions on all aspects of our business, including the impacts on participants in any future clinical trials and our employees, suppliers, vendors and business partners and our future access to capital, the ultimate extent of the impact on our business remains highly uncertain and will depend on future developments and factors that continue to evolve. Most of these developments and factors are outside our control and could exist for an extended period of time. We will continue to evaluate the nature and extent of the potential impacts to our business, results of operations, liquidity and capital resources. For additional information, see Part II, Item 1A of the Quarterly Report titled "Risk Factors."

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Components of Results of Operations

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To date, we have not generated revenue from any sources, including product sales, and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales or payments from future collaboration or license agreements that we may enter into with third parties, or any combination thereof. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates.

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Operating Expenses

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Our operating expenses consist of (i) research and development expenses and (ii) general and administrative expenses.

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Research and Development

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Research and development expenses consist primarily of costs incurred in connection with the research and development of our programs. These expenses include:

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costs of funding research performed by third parties, including Paragon Therapeutics, Inc. (“Paragon”) and Paragon Laboratories, Inc. (“Paragon Laboratories”), that conduct research and development activities on our behalf and services rendered under the Antibody Discovery and Option Agreement (the "Paragon ADOA"), Paragon Platform Option Agreement (the "Paragon POA"), and Paragon Research Letter Agreement ("Paragon Research Letter Agreement") for research programs, the Aβ program and undisclosed programs;

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expenses incurred in connection with continuing our current research programs and discovery-phase development of any programs we may identify, including under future agreements with third parties, such as consultants and contractors; and

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personnel-related expenses, including recruiting costs, salaries, bonuses, benefits and equity-based compensation expense.

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We expense research and development costs as incurred. For the three and nine months ended September 30, 2026, we recognized $20.3 million and $35.5 million, respectively, of expenses in connection with services provided by Paragon under the Paragon ADOA in our condensed consolidated statements of operations and comprehensive loss. For the three and nine months ended September 30, 2026, we recognized $2.0 million and $3.0 million, respectively, of expenses in connection with services provided by Paragon Laboratories under the Paragon Research Letter Agreement. For the three and nine months ended September 30, 2026, we recognized $1.4 million of expenses in connection with services provided by Paragon under the Paragon POA. For both the three and nine months ended September 30, 2025, we recognized $20.3 million of expenses in connection with services provided by Paragon for the Aβ program and stock compensation.

Current report

We expect that our research and development expenses will increase substantially for the foreseeable future as we continue to invest in research and development activities related to the continued development of our programs, developing any future programs, including investments in manufacturing, as we advance any program we may identify and commence and conduct clinical trials.

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General and Administrative

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General and administrative expenses consist primarily of personnel-related expenses, including recruiting costs, salaries, bonuses, benefits and equity-based compensation, for individuals in our executive, finance, legal, operations, human resources, business development and other administrative functions. Other significant general and administrative expenses include legal fees relating to corporate matters and patent-related activities, insurance costs, information technology, and professional and consulting fees associated with accounting, audit, tax and investor and public relations.

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Forward-Looking Information

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The 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.

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Overview and Recent Developments

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We 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.

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In 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.

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In 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.

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The Merger Agreement

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At 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:

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(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 existi…

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Each 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.

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Based on Cyclerion’s and Korsana’s capitalization as of June 30, 2026 and assuming Cyclerion’s net cash as of closing being equal to $(2.5) million, each share of Korsana Common Stock and Korsana Series A Preferred Stock is currently estimated to be entitled to receive approximately 1.4735 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.

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In 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 Korsana 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.

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Based on its current operating plan, Cyclerion expects that its current cash and cash equivalents will fund its operating expenses 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.

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Cyclerion CVR Agreement

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At 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.

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The 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.

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Financial Overview

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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 manufacturing, nonclinical studies, clinical trial activities. All research and development expenses are charged to operations as incurred.

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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 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.

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On 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, 2025, 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.

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In 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.

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Olinciguat 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.

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Zagociguat 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.

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On 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.

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PRIZM – 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).

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On 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 of 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.

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On 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.

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Under 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.

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We continue to evaluate other activities aimed at enhancing shareholder value, which may potentially include collaborations, licenses, mergers, acquisitions, and/or other targeted investments.

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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, 2026 and 2025. The product pipeline expenses relate primarily to external costs associated with nonclinical studies.

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Securing 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.

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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.

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If 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.

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We 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.

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General 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.

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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 Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

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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. 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.

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Results of Operations

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The 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.

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Revenue 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 and $0.2 million related to the Option extension fee and expense reimbursement during the three and six months ended June 30, 2025, respectively. The Option Agreement was terminated in October 2025 and no revenue was recognized during the three and six months ended June 30, 2026.

Current report — wording carried from elsewhere

Net Cash Used in Investing Activities