Cyclerion Therapeutics, Inc. ($CYCN)

Good morning, and welcome to the Cyclerion Therapeutics Korsana Biosciences Merger Agreement Announcement Conference Call. I would like to remind you that this call is being recorded for replay. [Operator Instructions] I will now turn the conference call over to Rhonda Chicko, Chief Financial Officer of Cyclerion Therapeutics. Please go ahead.

Thank you, and good morning. Before we begin, I'd like to remind you that during this call, we may make forward-looking statements. These statements include expectations of both Cyclerion's and Korsana's management team regarding the proposed transaction, including its anticipated timing and financial terms and the post-closing ownership structure of Cyclerion. They also include expectation about Korsana's lead program, KRSA-028 and its data platform, including the potential differentiation from other therapies, clinical development plans and regulatory filing time lines, expectations for additional pipeline programs and the anticipated cash position and runway of the combined company. These forward-looking statements are subject to certain risks and uncertainties. Our actual results may differ materially from expectations. For a discussion of risks and uncertainties, please review the descriptions included under the heading Risk Factors and Business in Cyclerion's most recent annual report on Form 10-K filed with the SEC as well as other SEC filings made by Cyclerion from time to time. In addition, Cyclerion intends to file a proxy statement with the SEC in connection with the proposed merger transaction, which will contain important information about Korsana, the combined company and the additional risk factors related to the transaction. Investors are urged to review the proxy statement carefully when it becomes available. These filings are available through the website maintained by the SEC at www.sec.gov and also available on Cyclerion's website. All forward-looking statements are made as of today's date, except to the extent required by law, we do not undertake any obligation to update any forward-looking statements. We also caution you against placing undue reliance on any forward-looking statements. I will now turn the conference call over to Regina Graul, Chief Executive Officer of Cyclerion.

Thank you, Rhonda, and good morning. Joining me today is Jonathan Violin, Chief Executive Officer of Korsana Biosciences. In our press release this morning, we announced a merger agreement between Cyclerion and Korsana. Upon completion of this all-stock transaction, the combined company plans to operate under the name Korsana Biosciences, and Jon is expected to lead the company as its CEO. I will review certain details of our proposed transaction with Korsana as well as a concurrent private placement by a group of leading biotech investors to support Korsana's pipeline programs. Jon will then provide an overview of Korsana, including its lead program and platform technology. In support of the proposed merger, Korsana has secured a private placement of approximately $380 million from a syndicate of leading health care investors. The financing includes subscriptions by such investors to purchase Korsana common stock and prefunded warrants exercisable for shares of Korsana common stock and is expected to close immediately prior to the completion of the merger. The company's combined cash position at closing, including the funds from the private placement is expected to provide a runway into 2029 and fund Korsana's KRSA-028 program through key clinical milestones expected in 2027. Under the terms of the agreement, as of the closing of the transaction, premerger Cyclerion shareholders are expected to own approximately 1.5% of the combined company. Premerger Korsana stockholders, inclusive of those participating in the private placement are expected to own approximately 98.5% of the combined company as of the closing of the transaction. The percentage of the combined company that Cyclerion shareholders will own as of the closing of the transaction is subject to adjustments based on the estimated amount of Cyclerion net cash immediately prior to the closing date. We expect the merger transaction to close in the third quarter of 2026, subject to the receipt of shareholder approvals and customary closing conditions. I would like to thank the Board members of both Cyclerion and Korsana for their support in approving the transaction, which is the result of a comprehensive strategic review by Cyclerion's Board and management team. We believe this is the best path forward for Cyclerion and our shareholders. Furthermore, we are confident in the ability of Korsana's seasoned leadership team to execute their vision of developing potential best-in-class therapies for neurodegenerative diseases with significant unmet needs. Through their proprietary platform and innovative pipeline, we believe the combined company is well positioned to deliver on their key clinical milestones in the coming years. With that, I will pass the conference call over to Jon.

Thank you, Regina, and good morning to everyone joining our call today. First of all, I'd like to thank the Cyclerion management team and Board for their support throughout this process and confidence in our strategy and clinical development plan. I'm grateful for the opportunity to lead the combined company and excited for the work ahead to discover and develop novel therapies to reduce the burden of neurodegenerative diseases, one of the largest unmet medical needs of our time. I'll share more about Korsana and our lead program, KRSA-028. But first, I'd like to note that listeners can access additional information about Korsana in our corporate presentation on our website, korsana.com. Korsana is the seventh company launched with assets that were discovered by the team at Paragon Therapeutics, who have a remarkable track record of creating precision engineered biologics with potential to become best-in-class therapeutics. With this foundation, Korsana is advancing a pipeline of potentially best-in-class therapeutics for neurodegenerative diseases. Our lead program is KRSA-028, a novel and differentiated shuttle version of a pyroglutamate amyloid beta antibody for Alzheimer's disease. Approximately 13 million Americans are projected to have Alzheimer's by 2050, with associated long-term health care costs projected to be over $1 trillion by that time. This is a disease with a massive and growing unmet need, and we believe that Korsana is well positioned to provide a potentially best-in-class therapeutic for patients who deserve better options than are currently available. Korsana's vision for advancing the treatment of Alzheimer's disease is grounded in 4 key beliefs. First, we believe that Alzheimer's is at an inflection point. While it's clearly one of the biggest unmet needs in medicine, it is now finally a druggable opportunity from a technical perspective. Two first-generation amyloid targeting drugs are now approved, validating and derisking the mechanism of action, but they leave substantial room to improve on safety, efficacy and convenience. Second, we believe that shuttling technology, the ability to carry therapeutics to target tissues increases brain exposure of amyloid targeting drugs, remarkably improving their therapeutic profile and is the best way to optimize amyloid targeting drugs to treat diseases like Alzheimer's. Third, we believe our approach based on our proprietary therapeutic targeting platform or THETA platform, has the potential to deliver a best-in-class product, supported by a seasoned leadership team of drug developers that have the experience and capability to bring novel therapeutics to market. And finally, we believe there is a path to rapid value creation with investigational products for Alzheimer's disease. Advancements in imaging biomarkers now enable precise measurement of amyloid plaque clearance in small numbers of patients, accelerating time lines to generate proof-of-concept data and making this an attractive space for investment. Our initial focus is to develop a durably best-in-class amyloid targeted therapy for Alzheimer's, and we think we have that in KRSA-028. We optimized 028 based on lessons learned from the 2 approved amyloid targeting products, investigational products like Roche's trontinemab and important discoveries made in partnership with Paragon Therapeutics. Notably, trontinemab, which increases brain exposure by targeting the transferrin receptor is the first shuttled anti-amyloid drug with clinical data, and it shows more rapid and thorough plaque clearance in the brains of Alzheimer's patients compared to trials of non-shuttle drugs. Strikingly, the trontinemab clinical data show a markedly lower rate of amyloid-related imaging abnormalities, or ARIA, compared to trial data for non-shuttled drugs. Both approved amyloid targeting drugs carry black box warnings for ARIA, and it's been a serious concern for this class of medications. So the trontinemab data have been met with high enthusiasm. However, while trontinemab has served as clear proof of concept for shuttle technology, its clinical data shows substantial room for improvement in safety, tolerability and convenience. In our preclinical studies, trontinemab targets and deplete reticulocytes, which can interrupt erythropoiesis and lead to anemia. Data show a 10% to 20% rate of anemia in the trontinemab Phase I/II trial and trends of reduced mean hemoglobin in patients on trontinemab. Furthermore, based on its Phase III trial design, trontinemab treatment is burdensome, requiring monthly intravenous infusions and pretreatment with steroids due to a high rate of infusion-related reactions. For patients, matching trontinemab's efficacy while improving on these factors will be a welcome advance. And in fact, we have promising preclinical data that point to the potential of 028 as a best-in-class therapeutic for Alzheimer's. In partnership with the team at Paragon Therapeutics, we designed 028 to maximize efficacy, safety and tolerability, including avoiding the anemia risk associated with other transferrin receptor shuttled molecules. 028 was also designed to optimize pharmacokinetics and biophysical properties to enable infrequent low-volume subcutaneous dosing. To maximize efficacy, KRSA-028 targets the pyroglutamate form of amyloid beta, which is enriched in plaques, making 028 a plaque selective therapeutic versus molecules that target other amyloid beta species. Clinical trials of plaque selective antibodies have shown more robust plaque clearance and numerically greater slowing of cognitive decline than antibodies that target other amyloid forms. We think this makes 028 well positioned to maximize the clinical benefit of anti-amyloid therapy. To avoid anemia and potentially to improve safety and tolerability, we designed KRSA-028 to include selective effector function modulation. We wanted to preserve antibody-dependent cellular phagocytosis or ADCP, believed to be the mechanism by which the approved anti-amyloid drugs clear amyloid plaques, but we wanted to reduce other antibody effector functions, which we hypothesized were responsible for the reticulocyte destruction and potentially other adverse immune effects of trontinemab such as a high rate of infusion-related reactions. To achieve this, we incorporated a number of clinically precedented point mutations in the Fc region of the molecule designed to reduce antibody-dependent cellular type cytotoxicity or ADCC and complement-dependent cytotoxicity or CDC, while preserving phagocytosis by ADCP. In addition, to improve pharmacokinetics to lower the dose and dose frequency required for efficacy, we also included clinically validated Fc modifications to extend half-life. Finally, to shuttle KRSA-028 into the brain, we designed 028 to include a transferrin receptor binding antibody fragment with similar binding characteristics to those of the clinically validated trontinemab. Our preclinical data, which you can review in our corporate presentation, show that KRSA-028 has the potential to deliver all the features we desired. It facilitates phagocytosis, matching the activity and potency of the approved pyroglutamate amyloid targeted drug donanemab. Compared head-to-head to trontinemab, it achieves more and higher sustained exposure, does not destroy reticulocytes and delivers five to sixfold higher brain concentrations. We've also formulated KRSA-028 at high concentrations with low viscosity and high stability, all important for subcutaneous administration. And our modeling suggests it should match trontinemab efficacy at a low injection volume, well within the range needed for clinically proven auto-injectors. We plan to initiate clinical development with an integrated Phase I/II design, beginning with single ascending doses in healthy volunteers, followed by multiple ascending dose cohorts in early Alzheimer's patients. We will then enroll expansion cohorts at select doses to further characterize activity, safety and tolerability and enable Phase III dose selection. We intend to file a CTN by the end of this year to initiate the single ascending dose arm in healthy volunteers in Australia and an IND at the beginning of 2027 to initiate the multiple ascending dose arm in early Alzheimer's patients in the United States. With this plan, we expect a key derisking readout from healthy volunteers in midyear 2027, including data for half-life extension, hematologic safety and CNS penetration. We then expect the first interim proof-of-concept data in Alzheimer's patients by the end of 2027, using PET tracers to evaluate how quickly plaque is cleared. From there, we expect a rich stream of clinical data readouts as we complete dose ranging and enroll expansion cohorts to collect all the data we believe we'll need to discuss a pivotal Phase III program of global regulators. The transaction we announced today is expected to fund all of these activities, putting the combined company in a very strong position to accelerate the development of KRSA-028 with cash runway into 2029. We believe KRSA-028 has best-in-class potential and the technology behind it provides us a platform to build a broader pipeline. We call the combination of our proprietary transferrin receptor binding sequence and Fc engineering, the therapeutic targeting platform or THETA platform. It has enabled us to initiate discovery programs for other CNS targets and indications where a subcutaneous anemia-free shuttle has the potential to deliver best-in-class profiles. We aren't revealing these programs yet for competitive reasons, but look forward to disclosing them later this year or in 2027. As some of you know, I've led the founding and growth of multiple biopharmaceutical companies. I've never been more excited about the company's prospects than I am for Korsana, and I look forward to the important progress I believe we'll make together in the coming years. We have a stellar team, an incredibly promising molecule in KRSA-028 and an immense opportunity in our pipeline. This is all anchored in a clear vision, delivering the best possible medicines for some of humanity's most devastating diseases. I'd like to thank the team at Paragon Therapeutics for their partnership, the Korsana team for joining this mission and Korsana's investors for their support. We have important work ahead, and I look forward to sharing updates on our progress with you over the coming months and years. With that, I'll now conclude my remarks and hand the call back to the operator. Thank you for joining the call today.

Ladies and gentlemen, this concludes the conference call today. All parties may now disconnect.