Korsana Biosciences, Inc PREM14A, filed Jun 9, 2023

Korsana Biosciences, Inc. (KRSA)

PREM14A 2023-06-09 For: 2023-06-09

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DATE & TIME:	[ ], 2023, at [ ] a.m., Eastern Time.

PLACE:	The special meeting of shareholders of Cyclerion Therapeutics, Inc. (the “Company,” or “Cyclerion,” “we,” us,” or “our”) will be a virtual meeting, which will be conducted only via live webcast. Shareholders will only be able to attend and participate in the special meeting online, vote shares electronically and submit questions during the special meeting by visiting www.virtualshareholdermeeting.com/CYCN2023SM. Instructions on how to attend the special meeting online and vote shares are described in the accompanying materials.

ITEMS OF BUSINESS:	The purposes of the meeting are to consider and vote upon the following proposals, which are described in more detail in the accompanying proxy statement:

	(1)	A proposal to authorize and approve the Asset Purchase Agreement, dated as of May 11, 2023 (the “Asset Purchase Agreement”), by and among JW Celtics Investment Corp., a Delaware corporation, JW Cycle Inc., a Delaware corporation (“Buyer”), and the Company, regarding the sale to Buyer of substantially all of the assets comprising the Company’s zagociguat (previously known as CY6463) and CY3018 programs, which may be deemed under Massachusetts law to be a sale of substantially all of our property and assets otherwise than in the usual and regular course of business, as contemplated by the Asset Purchase Agreement, and the other transactions contemplated by the Asset Purchase Agreement. We will retain the assets comprising our olinciguat, praliciguat and preclinical programs, and intend to maximize the value of these assets via out-licensing following the closing of the transaction;

	(2)	To approve, for purposes of complying with the Nasdaq Listing Rules, the potential issuance of shares of common stock of the Company, without par value (the “Common Stock”), upon conversion of the shares of the Company’s Series A Convertible Preferred Stock, without par value, issued by us to Peter M. Hecht, Ph.D., our Chief Executive Officer and member of the Company’s board of directors, pursuant to the terms of a Stock Purchase Agreement, dated as of March 31, 2023, to the extent that following such conversion Dr. Hecht would hold 20% or more of our outstanding Common Stock;

	(3)	To authorize the Company’s board of directors to adjourn and postpone the special meeting to a later date or dates, if necessary, to allow time for further solicitation of proxies if there are not sufficient votes present in person or represented by proxy at the special meeting to approve Proposal No. 1; and

	(4)	To transact any other business which properly may be brought before the special meeting or any adjournment or postponement thereof, including matters incidental to its conduct.

RECORD DATE:	You are entitled to vote at the special meeting or any adjournment of that meeting only if you were a shareholder at the close of business on [ ], 2023.

VOTING BY PROXY:	Please submit a proxy as soon as possible so that your shares can be voted at the meeting in accordance with your instructions. You may submit your proxy (1) over the Internet, (2) by telephone, or (3) by mail. For specific instructions, please refer to the information in the proxy statement and the instructions on the proxy card.

SHAREHOLDER LIST:	A list of record shareholders as of the record date will be available for inspection by any shareholder during the period from two business days after the date hereof through the special meeting at www.virtualshareholdermeeting.com/CYCN2023SM.

			BY ORDER OF THE BOARD OF DIRECTORS,

			[ ]
			Chief Financial Officer and Corporate Secretary
Cambridge, MA
[ ], 2023

			Page
SUMMARY TERM SHEET			1
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING			9
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS			13
UNAUDITED PRO FORMA FINANCIAL INFORMATION			14
Unaudited Pro Forma Financial Information			14
PROPOSAL NO. 1 THE ASSET SALE PROPOSAL			21
Information about the Parties			21
General Description of the Asset Sale Transaction			21
Background of the Asset Sale Transaction			22
Opinion of the Company’s Financial Advisor			33
Certain Prospective Financial Information			38
Reasons for the Asset Sale Transaction			40
Use of Proceeds and Future Operations			42
Appraisal Rights			42
Certain Material U.S. Federal Income Tax Consequences			45
Anticipated Accounting Treatment			46
Effects on our Company if the Asset Sale Transaction is Completed and the Nature of our Business following the Asset Sale Transaction			46
The Asset Purchase Agreement			47
Purchase and Sale of Assets			47
Assumption of Liabilities			48
Consideration for the Asset Sale Transaction			49
Representations and Warranties			49
Covenants			50
Closing Conditions			51
Exclusivity			52
Termination			52
PROPOSAL NO. 2 THE NASDAQ PROPOSAL			57
PROPOSAL NO. 3 THE ADJOURNMENT PROPOSAL			59
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			60
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE			62
OTHER INFORMATION			63
WHERE YOU CAN FIND MORE INFORMATION			64
MISCELLANEOUS AND OTHER MATTERS			65
ANNEX A ASSET PURCHASE AGREEMENT			A-1
ANNEX B FORM OF VOTING AND SUPPORT AGREEMENT			B-1
ANNEX C OPINION OF STIFEL, NICOLAUS & COMPANY, INCORPORATED			C-1
ANNEX D PART 13 OF THE MASSACHUSETTS BUSINESS CORPORATION ACT			D-1

	As of March 31, 2023
(in $’000, except per-share data)	Historical Cyclerion Therapeutics, Inc. (a)	Transaction Accounting Adjustments (b)	Notes	Pro Forma Cyclerion Therapeutics, Inc.
Assets
Current assets:
Cash and cash equivalents	$7,169	$5,100	(ii)	$12,269
Accounts receivable	96	—		96
Prepaid expenses	567	(182)	(i)	385
Other current assets	503	(20)	(i)	483
Total current assets	8,335	4,898		13,233
Investment in equity	—	5,350	(iv)	5,350
Property and equipment, net	—	—		—
Operating lease right-of-use asset	1,171	—		1,171
Other assets	1,950	—		1,950
Total assets	$11,456	$10,248		$21,704
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$3,925	$(2,779)	(i)	$1,146
Accrued research and development costs	1,605	(1,568)	(i)	37
Accrued expenses and other current liabilities	2,001	(554)	(i)	1,447
Total current liabilities	7,531	(4,901)		2,630
Commitments and contingencies
Stockholders' equity:
Common stock, without par value, 400,000,000 shares authorized and 43,524,894 issued and outstanding at March 31, 2023	—	—		—
Paid-in capital	270,052	—		270,052
Accumulated deficit	(266,108)	15,149	(ii)	(250,959)
Accumulated other comprehensive loss	(19)	—		(19)
Total stockholders' equity	3,925	15,149		19,074
Total liabilities and stockholders' equity	$11,456	$10,248		$21,704

			Sincerely,

			Errol De Souza, Ph.D.
			Chair of the Board of Directors

	Three months ended March 31, 2023
(in $’000, except per-share data)	Historical Cyclerion Therapeutics, Inc. (a)	Transaction Accounting Adjustments (b)	Notes	Pro Forma Cyclerion Therapeutics, Inc.
Cost and expenses:
Research and development	3,773	(3,201)	(iii)	572
General and administrative	3,269	(566)	(iii)	2,703
Total cost and expenses	7,042	(3,767)		3,275
Loss from operations	(7,042)	3,767		(3,275)
Interest and other income (expenses), net	88	—		88
Net income (loss) from continuing operations	$(6,954)	$3,767		$(3,187)
Earnings (loss) per share:
Basic and diluted net loss per share	$(0.16)	0.09		$(0.07)
Weighted average shares used in calculating:
Basic and diluted net loss per share	43,521	43,521		43,521

	Twelve months ended December 31, 2022
(in $’000, except per-share data)	Historical Cyclerion Therapeutics, Inc. (a)	Transaction Accounting Adjustments (b)	Notes	Pro Forma Cyclerion Therapeutics, Inc.
Revenues:
Revenue from development agreement	297	—		297
Revenue from grants	1,328	(1,328)	(iii)	—
Total Revenue	1,625	(1,328)		297
Cost and expenses:
Research and development	31,493	(25,505)	(iii)	5,988
General and administrative	14,504	(1,631)	(iii)	12,873
Loss on lease termination	—	—		—
Total cost and expenses	45,997	(27,136)		18,861
Loss from operations	(44,372)	25,808		(18,564)
Gain on extinguishment of debt	—	—		—
Interest and other income (expenses), net	294	—		294
Net income (loss) from continuing operations	$(44,078)	$25,808		$(18,270)
Earnings (loss) per share:
Basic and diluted net loss per share	$(1.01)	0.59		$(0.42)
Weighted average shares used in calculating:
Basic and diluted net loss per share	43,469	43,469		43,469

	Twelve months ended December 31, 2021
(in $’000, except per-share data)	Historical Cyclerion Therapeutics, Inc. (a)	Transaction Accounting Adjustments (b)	Notes	Pro Forma Cyclerion Therapeutics, Inc.
Revenues:
Revenue from license agreement	$3,000	$—		$3,000
Revenue from development agreement	320	—		320
Revenue from grants	622	(622)	(iii)	—
Total Revenue	3,942	(622)		3,320
Cost and expenses:
Research and development	37,636	(23,174)	(iii)	14,462
General and administrative	20,620	(1,742)	(iii)	18,878
Loss on lease modification	881	—		881
Total cost and expenses	59,137	(24,916)		34,221
Loss from operations	(55,195)	24,294		(30,901)
Gain on extinguishment of debt	3,564	—		3,564
Interest and other income (expenses), net	(16)	—		(16)
Net income (loss) from continuing operations	$(51,647)	$24,294		$(27,353)
Earnings (loss) per share:
Basic and diluted net loss per share	$(1.32)	0.62		$(0.70)
Weighted average shares used in calculating:
Basic and diluted net loss per share	39,144	39,144		39,144

			Amount
Prepaid expenses			$182
Other current assets			20
Accounts payable			(2,779)
Accrued research and development costs			(1,568)
Accrued expenses and other current liabilities			(554)
Assets and liabilities transferred			$(4,699)

			Amount
Cash received from Buyer upon closing			$8,000
Add: fair value of investment (footnote iv)			5,350
Expected consideration received from sale of Program Assets			$ 13,350
Gross consideration from the sale of Program Assets			$13,350
Less: Estimated closing and transaction costs			2,900
Expected net proceeds from sale of assets			10,450
Less: Assets and liabilities transferred (footnote ii)			(4,699)
Estimated gain on sale of the Program Assets			15,149
Estimated income tax expense			—
Expected net gain on sale of Program Assets after income taxes^(*)			$15,149

			Amount
Cash received from Buyer upon closing			$ 8,000
Less: Estimated closing and transaction costs			2,900
Expected impact on cash and cash equivalents^(**)			$ 5,100

	Three Months Ended March 31, 2023	Year Ended December 31, 2022	Year Ended December 31, 2021
Revenue from grants	$—	$1,328	$622
General and administrative	566	1,631	1,742
Research and development	3,201	25,505	23,174

($ in mm)	2H 2023	2024	2025	2026	2027	2028	2029	2030	2031	2032	2033	2034	2035	2036	2037	2038	2039	2040	2041	2042	2043	2044	2045
Total Revenue								$78	$266	$442	$754	$1,043	$1,251	$1,299	$1,335	$1,373	$1,411	$1,451	$1,493	$1,344	$1,303	$1,304	$1,327
EBIT	($15)	($23)	($34)	($40)	($56)	($66)	($81)	($45)	$85	$209	$499	$762	$963	$1,007	$1,039	$1,065	$1,092	$1,123	$1,250	$1,120	$1,085	$1,087	$1,107
Unlevered Free Cash Flow⁽¹⁾	($15)	($23)	($34)	($40)	($56)	($66)	($81)	($45)	$42	$162	$335	$496	$658	$723	$748	$767	$786	$808	$900	$844	$797	$790	$800

Name	Number of Shares of Common Stock Owned	Percentage
Officers and Directors:
Peter Hecht, Ph.D.⁽¹⁾	518,455	19.9%
Cheryl Gault⁽²⁾	17,612	*
Anjeza Gjino⁽³⁾	11,075	*
Terrance McGuire⁽⁴⁾	39,517	1.6%
Ole Isacson, M.D., Ph.D.⁽⁵⁾	2,621	*
Steven Hyman, M.D.⁽⁶⁾	1,553	*
Errol De Souza, Ph.D.⁽⁷⁾	1,500	—
All directors and executive officers as a group (7 individuals)	592,332	23.1%
Shareholders:
Slate Path Capital LP⁽⁸⁾	357,880	14.9%
FMR LLC (Fidelity)⁽⁹⁾	169,518	7.1%
MFN Partners L.P.⁽¹⁰⁾	169,461	7.1%
Artal International S.C.A. / The Invus Group, LLC ⁽¹¹⁾	138,956	5.8%
American Endowment Foundation⁽¹²⁾	133,027	5.5%

		Page(s)
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1.	General	A-1
Section 1.2.	References; Interpretation	A-10
ARTICLE II
THE ASSETS AND LIABILITIES
Section 2.1.	Purchase and Sale of the Purchased Assets	A-11
Section 2.2.	Excluded Assets	A-11
Section 2.3.	Assumption of Liabilities	A-12
Section 2.4.	Excluded Liabilities	A-13
Section 2.5.	Transfers not Effected at or Prior to the Closing Date; Transfers Deemed Effective as of the Closing Date	A-13
Section 2.6.	Further Assurances	A-15
Section 2.7.	Closing	A-15
ARTICLE III
THE PURCHASE PRICE
Section 3.1.	Purchase Price	A-16
Section 3.2.	Withholding Taxes	A-16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CYCLERION
Section 4.1.	Incorporation; Authority	A-16
Section 4.2.	The Purchased Assets	A-17
Section 4.3.	Compliance with Law	A-17
Section 4.4.	Consents and Approvals; No Conflicts	A-17
Section 4.5.	Contracts	A-17
Section 4.6.	Assigned Intellectual Property	A-17
Section 4.7.	Licenses, Permits and Authorizations	A-18
Section 4.8.	Taxes	A-18
Section 4.9.	Broker Fees	A-18
Section 4.10.	Representations with Respect to Consideration Shares	A-18
Section 4.11.	Acknowledgement by Buyers	A-19
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER PARENT AND BUYER
Section 5.1.	Incorporation; Ownership and Authority	A-21
Section 5.2.	Capitalization	A-21
Section 5.3.	No Operations	A-21
Section 5.4.	Consents and Approvals; No Violations	A-21
Section 5.5.	Financing	A-22
Section 5.6.	Broker’s Fees	A-22
ARTICLE VI
COVENANTS AND AGREEMENTS OF THE PARTIES
Section 6.1.	Operation of the Business	A-22
Section 6.2.	Corporate Examinations and Investigations	A-23
Section 6.3.	Know-How Licenses	A-23
Section 6.4.	Efforts	A-24
Section 6.5.	Employee Matters	A-24
Section 6.6.	Use of Retained Names and Marks	A-25

		Page(s)
Section 6.7.	Interim Period Preclinical and Clinical Trial Activities	A-25
Section 6.8.	Exclusivity	A-25
Section 6.9.	Matters related to Cyclerion Stockholders Meeting	A-27
Section 6.10.	Buyer Parent Purchase Agreement	A-29
Section 6.11.	Taxes	A-29
Section 6.12.	FDA Letters	A-30
Section 6.13.	Post-Closing Matters	A-30
Section 6.14.	Joint Confidentiality Agreements	A-31
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.1.	Conditions to the Obligations of All Parties	A-31
Section 7.2.	Conditions to Buyer Parent’s and Buyer’s Obligations at Closing	A-31
Section 7.3.	Conditions to Cyclerion’s Obligations at Closing	A-32
ARTICLE VIII
TERMINATION
Section 8.1.	Events of Termination	A-33
Section 8.2.	Effect of Termination	A-34
Section 8.3.	Termination Fee	A-34
ARTICLE IX
INDEMNIFICATION
Section 9.1.	Indemnification by Cyclerion	A-36
Section 9.2.	Indemnification by Buyers	A-36
Section 9.3.	Procedures for Indemnification	A-37
Section 9.4.	Indemnification Obligations Net of Insurance Proceeds and Other Amounts	A-38
Section 9.5.	Contribution	A-39
Section 9.6.	Additional Matters; Survival of Indemnities	A-39
Section 9.7.	Nonsurvival of Representations and Warranties and Pre-Closing Covenants	A-40
ARTICLE X
ACCESS TO INFORMATION; CONFIDENTIALITY
Section 10.1.	Provision of Information	A-40
Section 10.2.	Witness Services; Cooperation	A-41
Section 10.3.	Reimbursement; Other Matters	A-42
Section 10.4.	Confidentiality	A-42
Section 10.5.	Ownership of Information	A-43
ARTICLE XI
DISPUTE RESOLUTION
Section 11.1.	Governing Law	A-43
Section 11.2.	Proceedings	A-43
Section 11.3.	Immunity	A-43
Section 11.4.	Waiver of Jury Trial	A-44
ARTICLE XII
MISCELLANEOUS
Section 12.1.	Complete Agreement	A-44
Section 12.2.	Counterparts	A-44
Section 12.3.	Survival of Agreements	A-44
Section 12.4.	Fees, Costs and Expenses	A-44
Section 12.5.	Notices	A-44
Section 12.6.	Waivers	A-45
Section 12.7.	Assignment	A-45
Section 12.8.	Successors and Assigns	A-45

		Page(s)
Section 12.9.	Payment Terms	A-45
Section 12.10.	Subsidiaries	A-46
Section 12.11.	Third Party Beneficiaries	A-46
Section 12.12.	Bulk Sales	A-46
Section 12.13.	Titles and Headings	A-46
Section 12.14.	Exhibits and Disclosure Schedules	A-46
Section 12.15.	Severability	A-46
Section 12.16.	Public Announcements	A-46
Section 12.17.	Specific Performance	A-47
Section 12.18.	No Recourse	A-47
Section 12.19.	Interpretation	A-47
Section 12.20.	No Admission of Liability	A-47

Exhibit A	—	Form of Voting Agreement
Exhibit B	—	Bill of Sale and Assignment and Assumption Agreement
Exhibit C	—	Stockholder Agreements
Exhibit D	—	Domain Name Assignment Agreement
Exhibit E	—	Employee Expenses Allocation Schedule
Exhibit F		Patent Assignment Agreement
Exhibit G	—	Cyclerion Stockholder Letter
Exhibit H	—	Buyer Parent Purchase Agreement
Exhibit I-1	—	Cyclerion IND 147088 FDA Letter
Exhibit I-2	—	Cyclerion IND 138999 FDA Letter
Exhibit I-3	—	Cyclerion IND 155952 FDA Letter
Exhibit J	—	Cyclerion Orphan Designation Letter
Exhibit K	—	Transition Services Agreement
Exhibit L-1	—	Buyer IND 147088 FDA Letter
Exhibit L-2	—	Buyer IND 138999 FDA Letter
Exhibit L-3	—	Buyer IND 155952 FDA Letter
Exhibit M	—	Buyer Orphan Designation Letter

To Buyer:

	JW Celtics Investment Corp.
	c/o Ropes & Gray LLP
	1211 Avenue of the Americas
	New York, NY 10036-8704
	Attn:	Suni Sreepada
	Phone:	(212) 596-9960
	Email:	suni.sreepada@ropesgray.com

To Cyclerion:

	Cyclerion Therapeutics, Inc.
	245 First St, Riverview II, 18^th Floor
	Cambridge, MA 02142
	United States
	Attn:	Anjeza Gjino
	Phone:	857-327-8778
	Email:	agjino@cyclerion.com
	Fax:	617-890-6595

	With a copy, which shall not constitute notice to:

	Hughes Hubbard & Reed LLP
	One Battery Park Plaza
	New York, NY 10004
	Attention:	Gary Simon; Scott Naturman
	Email:	Gary.Simon@hugheshubbard.com; Scott.Naturman@hugheshubbard.com

JW CELTICS INVESTMENT CORP.

By:	/s/ Jason Wood
	Name:	Jason Wood
	Title:	Director

JW CYCLE, INC.

By:	/s/ Jason Wood
	Name:	Jason Wood
	Title:	Director

CYCLERION THERAPEUTICS, INC.

By:	/s/ Cheryl Gault
	Name:	Cheryl Gault
	Title:	Chief Operating Officer

			if to Buyer Parent, to:

			JW Celtics Investment Corp.

			Address: 1820 Calistoga Road Santa Rosa, CA 95404
			Attn: Jason Wood
			Phone: (415) 577-5305
			Email: jason@jwoodcapital.com

			With a copy, which shall not constitute notice to:

			Ropes & Gray LLP
			1211 Avenue of the Americas
			New York, NY 10036-8704
			Attn: Suni Sreepada
			Phone: (212) 596-9960
			Email: Suni.sreepada@ropesgray.com


			BUYER PARENT:

			JW CELTICS INVESTMENT CORP.

			By:
			Name:			Jason Wood
			Title:			Director

			HOLDERS:

			[If Holder is an entity]

			[Entity Name]

			By:
			Name:
			Title:

			[If Holder is an Individual]

			Name:

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH PROPOSAL.	Please mark votes as indicated in this example	☒
	FOR	AGAINST	ABSTAIN
Proposal 1 – Asset Sale Proposal
Authorize and approve the Asset Purchase Agreement, dated as of May 11, 2023 (the “Asset Purchase Agreement”), by and among JW Celtics Investment Corp., JW Cycle Inc. (“Buyer”), and the Company, regarding the sale to Buyer of substantially all of the assets comprising the Company’s zagociguat (previously known as CY6463) and CY3018 programs, which may be deemed under Massachusetts law to be a sale of substantially all of the Company’s property and assets otherwise than in the usual and regular course of business, as contemplated by the Asset Purchase Agreement, and the other transactions contemplated by the Asset Purchase Agreement.	☐	☐	☐

Proposal 2 – Nasdaq Proposal
Approve, for purposes of complying with the Nasdaq Listing Rules, the issuance of shares of common stock of the Company, without par value (the “Common Stock”) upon potential conversion of the shares of the Company’s Series A Convertible Preferred Stock, without par value, issued by the Company to Peter M. Hecht, Ph.D., the Company’s Chief Executive Officer and member of the Company’s board of directors, pursuant to the terms of a Stock Purchase Agreement, dated as of March 31, 2023, to the extent that following such conversion Dr. Hecht would hold 20% or more of the Company’s outstanding shares of Common Stock.	☐	☐	☐
Proposal 3 – Adjournment Proposal
Authorize the Company’s board of directors to adjourn and postpone the Special Meeting to a later date or dates, if necessary, to allow time for further solicitation of proxies if there are not sufficient votes present in person or represented by proxy at the Special Meeting to approve Proposal 1.	☐	☐	☐

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