Moonlake Immunotherapeutics quarterly report, Q1 FY2022

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Business context and reporting period

This unaudited Form 10-Q covers the three months ended March 31, 2022. During the quarter, the registrant was still Helix Acquisition Corp., a Cayman Islands blank-check company seeking a business combination; its reported results do not reflect MoonLake AG’s operating business. The combination with MoonLake AG closed on April 5, 2022, and Helix changed its name to MoonLake Immunotherapeutics.

Financial results and liquidity

  • Revenue: No operating revenue in either Q1 2022 or Q1 2021.
  • Net loss: $2.704 million in Q1 2022 versus $76,291 in Q1 2021. General and administrative expense rose to $2.711 million from $94,106; Q1 2022 also included $8,431 of trust-account interest income and $657 of interest expense.
  • Margins: Not meaningful because the company had no operating revenue.
  • Cash flow: Operating cash used was $793,454 versus $107,795 used in Q1 2021. The cash flow statement reports $150,000 of financing proceeds from a related-party note and $101 million of PIPE financing recorded as restricted cash.
  • Assets and liquidity at March 31: Total assets were $231.2 million, including $23,336 of unrestricted cash, $101 million of restricted cash, a $15 million short-term loan receivable, and $115.1 million held in the trust account. The filing’s MD&A also describes $101.0 million as cash outside the trust account; the balance sheet classifies that amount as restricted cash.
  • Liabilities: Total liabilities were $206.8 million, including $5.8 million of accrued expenses, $116 million of PIPE capital contributions, an $80.8 million share redemption liability, a $150,000 related-party note, and a $4.025 million deferred underwriting fee. The company reported a working-capital deficit of approximately $5.8 million.

Material changes and subsequent events

  • Net loss increased substantially year over year, primarily reflecting higher general and administrative expenses associated with pursuing the business combination.
  • On March 31, shareholders redeemed 8,080,645 shares for approximately $80.8 million; the balance sheet records the redemption liability. The filing later reports that approximately $80.8 million was paid at the April 5 closing.
  • The April 5 closing included a $116 million gross PIPE subscription, issuance of 11.7 million Class A shares (including 100,000 shares issued to placement agents for fees), and a $134.6 million contribution to MoonLake AG that included repayment of a $15 million loan. MLTX began trading on Nasdaq on April 6.
  • At the closing, the company issued 18.5 million Class A shares to BVF shareholders and 15.8 million Class C shares to other MoonLake AG equityholders. Class C shares carry voting rights but no economic rights.

Outlook, risks, and unusual items

  • Management said post-combination capital was expected to fund operations for at least two years, compared with MoonLake’s prior expectation of at least three and a half years; the shorter runway reflects the level of redemptions. The filing provides no detailed operating or revenue guidance.
  • The filing disclosed a material weakness in internal control over financial reporting relating to accounting for complex financial instruments. Management concluded disclosure controls and internal controls were ineffective as of March 31, 2022, and described remediation efforts, with no assurance those steps will achieve their intended effects.
  • Before the combination, management said going-concern uncertainty was alleviated by the April 5 closing and resulting capital, and believed funds would support operations for at least two years.
  • The filing noted that potential effects of COVID-19 and the Russia-Ukraine conflict were not readily determinable. It reported no legal proceedings, no off-balance-sheet financing arrangements, and no material changes to the risk factors cited in the proxy statement.
  • Transaction-related deferred and contingent fees paid at closing were approximately $9.1 million, including expense reimbursements. The filing also describes a manufacturing agreement for sonelokimab that may be terminated for convenience under its terms.

Important facts for investors to verify

  1. Post-closing cash, restricted cash, redemption payments, transaction costs, and the resulting operating runway in subsequent filings.
  2. The final post-combination share count, voting structure, and economic rights of each share class.
  3. Progress in remediating the material weakness and whether controls become effective.
  4. MoonLake AG’s operating results, development spending, clinical and manufacturing commitments, and any updated guidance; Q1 figures here are principally those of the pre-combination SPAC.
  5. The precise availability and use restrictions on the $101 million reported as restricted cash, given the differing descriptions in the balance sheet and MD&A.