MoonLake Immunotherapeutics — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Unaudited consolidated financial statements; amounts in USD. MoonLake is a clinical-stage biotechnology company developing sonelokimab (SLK), an IL-17A/IL-17F inhibitor. It has no approved products and reported no product revenue. The April 5, 2022 business combination was accounted for as a reverse recapitalization, so 2022 and historical comparisons reflect the operating business, MoonLake AG, with share counts adjusted for the exchange ratio.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021, restated | Nine months 2022 | Nine months 2021, restated |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $9.0 million | $0.7 million | $30.7 million | $30.5 million |
| General and administrative expense | $5.7 million | $5.6 million | $17.7 million | $8.8 million |
| Net loss | $14.7 million | $6.3 million | $48.0 million | $39.3 million |
| Net loss per share attributable to controlling interests | $0.27 | $2.63 | $1.27 | $4.06 |
| Operating cash used | Not separately stated | Not separately stated | $44.3 million | $27.7 million |
Net loss per share is presented as a loss: $0.27, $2.63, $1.27 and $4.06, respectively. The 2021 figures were restated for founder-share compensation accounting. No operating margin is meaningful because the company had no revenue.
At September 30, 2022, cash and cash equivalents were $41.2 million, including $19.9 million of short-term securities with original maturities of three months or less; additional short-term marketable debt securities were $42.3 million. Together, these assets totaled $83.5 million. Current assets were $88.5 million and current liabilities $6.0 million. The $15.0 million short-term loan outstanding at December 31, 2021 was repaid in connection with the business combination; no loan balance remained at September 30, 2022. Total equity was $82.6 million.
Nine-month investing cash use was $42.2 million, principally purchases of marketable debt securities. Financing provided $119.7 million, including $134.7 million of net business-combination proceeds, offset by the $15.0 million loan repayment. Cash and cash equivalents increased by $33.2 million to $41.2 million.
Material changes and notable items
- Q3 R&D expense rose $8.4 million year over year, mainly due to clinical and non-clinical research, supply and logistics, consulting, and personnel costs. Nine-month R&D expense was broadly unchanged, but the mix shifted from the prior-year $25.0 million SLK license acquisition cost toward current clinical development and a $5.4 million milestone payment.
- Nine-month G&A expense approximately doubled, reflecting higher share-based compensation, personnel, public-company and transaction-related costs, and insurance.
- The business combination generated $134.7 million in net proceeds. At quarter-end, 36.9 million Class A and 15.8 million Class C shares were issued and outstanding. Class C shares carry voting rights but no economic rights. Subsequent to quarter-end, 2.1 million Class C shares were exchanged for Class A shares.
- Comprehensive loss included $0.5 million of other comprehensive income for the first nine months, including unrealized gains on marketable securities and actuarial gains on employee benefits.
Outlook, risks and commitments
- Management said available cash, cash equivalents and short-term marketable securities were expected to fund operating expenses and capital needs into the second half of 2024. The company expects significant losses for at least the next five years and will require substantial additional funding; no product-sales revenue is assured.
- Phase 2 HS trials began in April 2022; enrollment was progressing as planned, with primary endpoint data expected in mid-2023. The company expected to begin PsA enrollment before the end of 2022, with primary endpoint data expected toward the end of 2023. It did not then plan to initiate Phase 3 trials in psoriasis.
- Contractual obligations totaled $37.7 million: $37.4 million of purchase commitments, mostly for clinical research and manufacturing, and $0.3 million of lease commitments. Separately, the SLK license includes potential milestone payments of up to €302.1 million (reported as $295.5 million at the period-end exchange rate) and royalties in the low-to-mid-teens percentage range of net sales.
- Key risks include clinical and regulatory uncertainty, dependence on SLK and its licensor, the need for further financing, reliance on third-party manufacturers and research providers, and potential delays or cost increases. Management said COVID-19’s impact had been limited to date but future effects were uncertain. The filing also identifies pricing and reimbursement legislation, including the Inflation Reduction Act, as a potential commercialization risk.
- Disclosure controls and procedures were concluded to be ineffective as of September 30, 2022 because of an unremediated material weakness in controls over accounting for complex and bespoke transactions. Management had implemented remedial measures, but had not yet established that they had operated effectively for a sufficient period.
- The filing reports no material legal proceedings. It also describes a prior-period restatement related to accounting for restricted founder shares as share-based compensation.
Investor facts to verify
- Whether HS and PsA enrollment and data-readout timelines remain on track, and what subsequent clinical results show.
- Whether the stated runway into the second half of 2024 remains supportable given spending, trial plans, and the need for additional financing.
- The status, timing, and potential financial impact of SLK license milestones, royalties, and the $37.4 million of purchase commitments.
- Progress in remediating the material weakness and whether disclosure controls have been found effective in subsequent filings.
- The implications of Class C share conversions for economic ownership, share count, and reported loss per share.