NVSEF - MoonLake: Further Gains Possible With End Of 2023 Data Releases

2023-06-27 17:50:30 ET

Summary

• The primary endpoint of MoonLake Immunotherapeutics' HiSCR75 was met with statistical significance in the phase 2 MIRA trial, when Hidradenitis suppurativa patients were treated with sonelokimab.
• The global Hidradenitis Suppurativa market is expected to reach $2.24 billion by 2030.
• Positive results were achieved in the phase 2b study using sonelokimab for the treatment of patients with psoriasis.
• Results from a phase 2 study, using sonelokimab for the treatment of patients with active psoriatic arthritis, are expected in Q4 of 2023.

MoonLake Immunotherapeutics ( MLTX ) is a good speculative biotech play to look into. That's because it reported positive results from a phase 2 study using its drug sonelokimab for the treatment of patients with moderate-to-severe hidradenitis suppurativa [HS].

The stock is up, trading higher by 77% on the back of this news, closing the day (June 26) at $46 per share. Despite the huge rise in share price, I believe that further gains are possible. That's because this Nanobody drug sonelokimab is also being explored in an ongoing phase 2 study treating patients with psoriatic arthritis [PA]. Results from this mid-stage study are expected to be released in Q4 of 2023. With sonelokimab being smaller in size than many antibodies currently being used to treat inflammatory and immunology disorders, it might provide better tissue penetration.

Thus, the improved tissue penetration observed in the phase 2 study in patients with HS, might translate to improved efficacy in treating patients with PsA. The company already tested out this Nanobody drug in a phase 2b study in patients with moderate-to-severe plaque psoriasis and established proof of concept. Lastly, the phase 2 study data released for sonelokimab for patients with HS, was only 12-week data. The biotech stated that it also intends to release 24-week data from this very same study in Q4 of 2023, which provides another catalyst opportunity for traders/investors.

With proof-of-concept being established in treating patients with HS using sonelokimab, plus a few other catalysts expected in Q4 of 2023, these are the reasons why I believe that MoonLake Immunotherapeutics is a good speculative biotech play to look into.

Positive Results Achieved In Treating Patients With Hidradenitis Suppurativa

As I stated above in the beginning, MoonLake Immunotherapeutics achieved positive results in a phase 2 study using its Nanobody drug sonelokimab for the treatment of patients with moderate-to-severe Hidradenitis Suppurativa [HS]. Hidradenitis suppurativa is a skin disorder whereby there are painful lumps deep in a patient's skin. These types of lumps can usually develop on part of the body where the skin touches. Some examples for such parts on the body are as follows:

• Armpits
• Groin area
• Inner thighs
• Buttocks area.

The skin lesions and/or lumps develop because of inflammation and infection of the sweat glands. These not only are painful for patients with HS, but they can also become quite large and drain pus as well. The global Hidradenitis Suppurativa market is expected to reach $2.24 billion by 2030 . This is a good market opportunity for MoonLake, not just because of the amount of sales it could generate, but the fact that it achieved a much tougher endpoint compared to other clinical trials.

This phase 2 MIRA study recruited a total of 234 patients with HS, who were randomized to receive either 120 mg sonelokimab, 240 mg sonelokimab or placebo for a total of 12 weeks. Now, back to the tougher primary endpoint compared to other studies I mentioned. The primary endpoint established for MIRA was percentage of patients who achieved Hidradenitis Suppurativa Clinical Response 75 [HiSCR75]. In essence, this endpoint was looking for the proportion of patients with at least a 75% reduction from baseline in abscess and inflammatory nodule [AN] Count, with no increase from baseline in abscess or draining fistula count. This endpoint is tougher, because as I stated above, it requires patients to achieve a 75% reduction in disease compared to all other studies where the primary endpoint only establishes a reduction of 50% in disease or Hidradenitis Suppurativa Clinical Response [HiSCR50].

What does this mean for MoonLake? Not only does it allow it to move forward with a superior drug for HS compared to others, but it also established a huge milestone for HS clinical development. That is, to achieve a first in being able to incorporate and beat placebo with respect to the primary endpoint of HiSCR75 in treating patients with HS.

The trial was made to be tough, because it incorporated the most stringent type of analysis. That is, to target intent-to-treat non-responder imputation [ITT-NRI] patients. The primary endpoint of HiSCR75 was met with statistical significance , of both 120 mg and 240 mg of sonelokimab compared to placebo at week 12. The statements I made above were proven with respect to the clinical data that was released, which is as follows:

• 120 mg of sonelokimab at week 12 achieved a 29 ppt delta to placebo on HiSCR75 with a statistically significant p-value of p=0.0002
• 120 mg of sonelokimab at week 12 achieved a 38 ppt delta to placebo on HiSCR50 with a statistically significant p-value of p<0.0001

Both of these pieces of data, reinforce what I stated above, in that treatment with Nanobody sonelokimab, compared to placebo, reached the highest clinical activity compared to all other therapies used in similarly stringent pivotal-like trials for HS.

Additional Catalysts Expected In Q4 Of 2023 That Might Boost Stock Price Even Higher

Despite the huge run higher in the MoonLake Immunotherapeutics stock price, with these positive results from the phase 2 MIRA study, I believe that further upside is possible. The reason why I believe this to be the case is because there are a few other data readouts expected towards the end of 2023. For starters, even though the MIRA study only looked at 12-weeks of treatment of sonelokimab for HS patients, the goal for the company is to also to release 24-week data from this very same study in Q4 of 2023. Then, MoonLake also expects to release results from another phase 2 study known as ARGO in the same time period.

This trial is expected to recruit a total of 200 adult patients with active psoriatic arthritis [PsA], who are to receive different doses of sonelokimab, with placebo control and adalimumab as an active reference arm. The primary endpoint of this phase 2 ARGO trial is percentage of patients achieving a ?50% improvement in signs and symptoms of disease from baseline, compared to placebo, as measured by the American College of Rheumatology [ACR] 50 response. These additional catalysts should be watched closely and may also possibly cause the stock to trade higher.

Nanobody Technology Is What Separates MoonLake Apart From Other Pharmaceuticals

As I noted above, MoonLake was able to achieve a monumental achievement with respect to using sonelokimab for the treatment of patients with HS. Despite the trial being designed with a harder endpoint, HiSCR75, it was still able to achieve it with statistical significance. Why was this biotech able to achieve the efficacy it did with its Nanobody drug sonelokimab in HS, compared to other monoclonal antibodies used for the same indication? It is because of its mode of action where it can efficiently inhibit both IL-17F in addition to IL-17A. It binds to three VHH domains covalently linked by flexible glycine-serine spacers. VHH antibody or Nanobody is the antigen binding fragment of heavy chain only antibodies. The domains listed for sonelokimab are as follows:

• Two domain bindings are IL-17A and IL-17F, which allows the inhibition of: IL-17A/A, IL-17A/F, and IL-17F/F dimers
• A third central domain binds to human albumin which further enhances efficacy of the drug at sites of inflammatory edema.

Lastly, it's all about the size of sonelokimab, which is a 40 kDa humanized Nanobody. As I stated above, the smaller size allows for better tissue penetration, which is especially important for being able to target skin diseases such as HS, psoriatic arthritis [PsA] and psoriasis. The ability for it to target both IL-17A and IL-17F is what sets it apart from other IL-17 inhibitors used for inflammatory disorders.

For example, Secukinumab, sold under the brand name COSENTYX by Novartis ( NVS ), is an IL-17A inhibitor drug. It has been approved by the FDA to treat many diseases including: Psoriasis, ankylosing spondylitis and psoriatic arthritis. As you can see, with MoonLake being able to target both IL-17A and IL-17F, it allowed it to achieve a huge landmark milestone in treating patients with HS.

If further studies show similar safety profile of sonelokimab compared to other IL-17 dugs likes COSENTYX in inflammatory disorders, plus achieves a superior efficacy profile as well, then MoonLake could become a major leader in the inflammatory disorder space. It would have a huge competitive advantage over other IL-17 drug companies targeting the same space. In addition, another major improvement of sonelokimab is its third binding domain I described above. Whereby it binds to albumin, which further enhances efficacy of this drug in inflammatory disorders.

Financials

According to the 10-Q SEC Filing , MoonLake Immunotherapeutics had cash, cash equivalents and short-term marketable debt securities of $63.1 million as of March 31, 2023. The company burned through about $9.1 million in cash in Q1 of 2023. It believed that it would have enough cash to fund its operations until the end of 2024. However, being that the stock traded higher on the back of positive news from the phase 2 MIRA study, it chose to enact an offering immediately. It enacted an underwritten public offering to sell $250 million of its Class A ordinary shares and, in lieu of Class A ordinary shares to certain investors that so choose, pre-funded warrants to purchase Class A ordinary shares. On top of that, MoonLake is also expected to grant the underwriters of the offering an option for a period of 30 days to purchase up to an additional $37.5 million of its Class A ordinary shares at the public offering price, less underwriting discounts and commissions. Based on this recent cash raise, there should be no risk of dilution in the near-term.

Risks To Business

There are several risks that traders/investors should be aware of before investing in this biotech. The first risk to consider would be with respect to the ongoing phase 2 MIRA study, which is using sonelokimab for the treatment of patients with HS. Even though the 12-week study data turned out to be positive, there is no guarantee that positive 24-week results will be released in Q4 of 2023.

A second risk to consider would be with respect to another catalyst which is approaching in Q4 of 2023. That is when MoonLake Immunotherapeutics will release results from its phase 2 ARGO study at that time. This mid-stage study is using sonelokimab for the treatment of patients with active psoriatic arthritis [PsA].

A final risk to consider would be with respect to the treatment of patients with psoriasis with the use of sonelokimab. Even though the positive results were achieved in a phase 2 study, there is no guarantee that a similar outcome will be achieved in a phase 3 study.

Conclusion

The final conclusion is that MoonLake Immunotherapeutics is a good speculative biotech play to look into. That's because it is expecting to have three indications in phase 3 testing in the coming years.

It has already achieved positive results from a phase 2b study using sonelokimab for the treatment of patients with psoriasis awhile back and has gone on to also achieve positive results in the phase 2 study using this drug to treat patients with HS. A trial readout from the mid-stage ARGO study, which is using sonelokimab for the treatment of patients with PsA, is expected to be released in Q4 of 2023.

With the potential for it to tap into three multi-billion-dollar markets in the coming years, plus a few catalysts on the way in Q4 of 2023, these are the reasons why I believe that MoonLake Immunotherapeutics is a good speculative biotech play to look into.

For further details see: