MoonLake Immunotherapeutics (NASDAQ:MLTX) traded higher on Tuesday even as Wall Street opted to downgrade the Swiss biotech following a late-stage trial setback for its lead candidate, sonelokimab, which wiped off nearly 90% of its market cap in the previous session.
Citing data from its Phase 3 VELA program for sonelokimab in hidradenitis suppurativa, a skin condition, MoonLake (NASDAQ:MLTX) said on Monday that its VELA-2 trial didn’t reach the primary endpoint.
Citi downgraded the company to Neutral from Buy in reaction, citing risks to the drug’s approval and its competitiveness compared to potential rivals such as Oruka Therapeutics’ (ORKA) ORKA-002, which has a mechanism that can target HS.
“We see significant regulatory risk for sonelokimab given VELA-2 missed stat sig on the primary statistical analysis,” Bloomberg News reported, citing a research note from analyst Samantha Semenkow.
“From a commercial standpoint, VELA looks at best undifferentiated and at worst meaningfully inferior when compared to Bimzelx on cross-trial comparison,” she wrote, referring to an FDA-approved HS therapy from UCB (OTCPK:UCBJF) (OTCPK:UCBJY). Semenkow also lowered her price target on MLTX to $5 from $72 per share.
Noting that the market somewhat overreacted to the announcement, Seeking Alpha analyst Stephen Ayers downgraded his rating to Hold from Buy, citing potential regulatory setbacks and an uncertain outlook for the company.
“The VELA-2 miss clouds MLTX's differentiation versus competitors like UCB's Bimzelx and delays potential market entry by 1-2 years,” Ayers wrote. However, he added that the company's cash runway extends into 2028, supporting continued development in HS and other indications.”
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