Biotech stock MoonLake Immunotherapeutics rocketed Tuesday on a report Merck offered to buy it for "more than $3 billion."
It's unlikely a deal would take place before September when MoonLake is expected to unveil final-phase test data for its drug, sonelokimab or SLK, in patients with hidradenitis suppurativa, RBC Capital Markets analyst Brian Abrahams said in a report. This condition causes painful pus-filled lumps and nodules deep in the skin.
This data will be a "binary event" for MoonLake Immunotherapeutics, Wedbush analyst Yun Zhong said in a report. Zhong sees a "near-zero risk" that the two Phase 3 studies miss their goals. The focus will be on whether sonelokimab can differentiate from UCB's Bimzelx, which is already approved to treat hidradenitis suppurativa, or HS.
"We continue to believe SLK's data will be robust enough to reaffirm potential competitive advantages and a key role in the multi-$B market — driving substantial share appreciation and crystallizing a compelling profile for both investors and potential acquirers," RBC's Abrahams said.
MoonLake Immunotherapeutics shares jumped 18%, closing at 48.55. The biotech stock topped its 200-day moving average for the first time since February. Merck stock rose 1.2%, ending the regular session at 77.14.
Representatives of the two companies didn't immediately return a request for comment.
75% Improvement In Symptoms
The goal of MoonLake's study is to improve symptoms on a measurement called Hidradenitis Suppurativa Clinical Response 75, or HiSCR75. This means patients experience a 75% reduction in total abscess and inflammatory nodule count with no increase in abscess or draining.
In midstage testing, 29% more patients who received sonelokimab showed a 75% improvement in their symptoms. RBC's Abrahams expects a 22% to 24% placebo-adjusted improvement in Phase 3 testing. He expects the drug to outperform Bimzelx.
"We believe this result would differentiate SLK vs. Bimzelx, and could see the stock move 70%+ to the upside; a conservative 30-40% takeout premium on top of this could value the stock at >$110/shr," he said.
Abrahams has an outperform rating and 67 price target on biotech stock MoonLake.
Huge I&I Deal Premiums
Similarly, Wedbush's Zhong says large immunology and inflammation deals have typically nabbed premiums of 70% or greater. He says a $5 billion deal would make more sense for MoonLake.
The HS market includes 1.5 million patients in the U.S. About 55% have moderate to severe disease.
"The HS market should be large enough for multiple efficacious therapies to achieve commercial success," he said. "However, we caution that MLTX shares could show negative reaction if SLK's efficacy is perceived as only comparable to that of (Bimzelx)."
He notes just outperforming the placebo by 20% would support sonelokimab as the "gold standard" treatment for HS.
"Achieving that goal should help to reduce competition and commercial risks," he said.
Zhong rates MoonLake Immunotherapeutics stock an outperform with an 80 price target.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
