By David Bautz, PhD
NASDAQ:CYCN
READ THE FULL CYCN RESEARCH REPORT
Initiating Coverage
We are initiating coverage of Cyclerion Therapeutics, Inc. (NASDAQ:CYCN) with a valuation of $8.00. Cyclerion is a clinical-stage biopharmaceutical company that has recently undergone a strategic transformation to focus on the development of novel neuropsychiatric therapies, with an initial emphasis on treatment-resistant depression (TRD). Cyclerion’s lead program, CYC-126, is a differentiated, anesthetic-based therapeutic approach designed to induce specific, reproducible brain states associated with rapid and durable antidepressant effects. The company’s strategy combines the use of well-characterized and approved pharmacologic agents, propofol and dexmedetomidine, with a proprietary, EEG-guided delivery system intended to consistently, with clinical reliability and at scale, deliver the anesthetic-based therapy.
Major depressive disorder (MDD), and particularly its treatment-resistant forms, remains an area of significant unmet medical need, with a substantial proportion of patients failing to achieve adequate response despite multiple lines of therapy. While recent advances, including esketamine and neuromodulation techniques, have expanded available options for TRD patients, meaningful limitations persist with respect to durability of response, tolerability, access, and cost. Cyclerion is seeking to address these challenges by leveraging decades of clinical experience with anesthetic agents, paired with modern neurophysiologic monitoring and closed-loop control, to deliver a therapy that may offer rapid onset, reproducible efficacy, and a differentiated risk–benefit profile.
Cyclerion plans to advance CYC-126 into a Phase 2 proof-of-concept study in TRD, with the trial expected to be initiated in Australia but also contain U.S. sites and patients. The company has entered into a strategic collaboration with Medsteer, a medical technology company with expertise in anesthetic delivery and neurophysiologic monitoring, to leverage key intellectual property for closed-loop delivery of anesthetics within CYC-126. We view this study as a key inflection point for the company, as positive proof-of-concept data would help validate both the therapeutic hypothesis and the broader platform potential of Cyclerion’s anesthetic-based, closed-loop neuropsychiatric approach along with defining the design for confirmatory randomized, controlled trials.
Differentiated Approach to TRD – CYC-126 leverages well-characterized anesthetic agents delivered via a novel, EEG-guided system designed to induce reproducible brain states associated with antidepressant effects, potentially addressing key limitations of existing TRD therapies.
Capital-efficient Clinical Development Strategy – By utilizing approved pharmacologic agents and pursuing an initial multinational Phase 2 proof-of-concept study, in part, under the Australian CTN framework, Cyclerion aims to generate meaningful clinical data while managing development costs and timelines.
Large and Underserved Patient Population – TRD represents a significant subset of the MDD population (3M in the U.S.) with limited effective treatment options, supporting the potential for meaningful clinical and commercial impact if efficacy and durability are demonstrated.
Platform Potential Beyond Depression – While initial development is focused on TRD, management believes its EEG-guided, closed-loop delivery system may have broader applicability across neuropsychiatric and neurologic indications where precise control of brain states is clinically relevant.
Valuation
We value Cyclerion using a probability adjusted discounted cash flow model that takes into account potential future revenues of CYC-126 in treating treatment-resistant depression (TRD). While not currently incorporated into the model, the company does have plans to pursue CYC-126 in patients with additional neuropsychiatric conditions and this represents potential upside to the valuation.
For TRD, we estimate there are approximately three million patients in the U.S. While TRD is defined as depression that does not respond to at least two antidepressants of adequate dose and duration, Cyclerion will be targeting the entire TRD population and not just TRD patients that have already failed other therapies. Following initiation of the Phase 2 proof-of-concept study in the second half of 2026, we anticipate initial data from that study in 2027 and the full dataset to be available in 2028. We estimate that positive results will lead to a Phase 3 program initiating in 2029, topline data reported in 2032, and the potential for approval in 2033. Electroconvulsive therapy (ECT) was used to treat approximately 100,000 patients in 2024, even with the acute and chronic safety concerns associated with the procedure. Since these concerns are not an issue for CYC-126, we believe CYC-126 could be used to treat at least double that number of patients per year. We model for patients to be treated an average of 15 times per year (nine induction treatments and then six maintenance treatments), however there will probably be some variance in that number. Modeling for 200,000 patients treated per year leads to peak sales of approximately $2 billion, which we model as occurring nine years after approval. Prior to commercialization, we model operating expenses on an absolute basis that transitions to revenue-based assumptions post-launch as the business scales. Using a 12% discount rate and a 33% probability of approval leads to a net present value for the TRD indication of $189 million. Combining that with the current cash balance and dividing by the diluted share count plus an additional 20 million shares to account for future dilution leads to a valuation of $8.00 per share.
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