Moonlake Immunotherapeutics faced a devastating market reaction Monday as shares plummeted more than 80% following disappointing results from two closely watched late-stage trials of its experimental immune disease drug sonelokimab. The Swiss biotechnology company's stock price crashed from about $62 per share to less than $10 early Monday after the drug fell short of investor expectations in treating hidradenitis suppurativa.
Mixed Trial Results Dampen Commercial Prospects
Both Phase 3 trials focused on patients with hidradenitis suppurativa, a chronic inflammatory skin condition that causes painful abscesses and tissue scarring. In the first study, approximately 35% of participants treated with sonelokimab experienced significant reduction in disease symptoms after four months, compared to about 18% of placebo recipients. While this result achieved statistical significance, the difference between treatment groups was smaller than executives and investors had anticipated.
The second study presented even more concerning results, with sonelokimab failing to meet its primary objective entirely. Moonlake attributed this failure to a "higher than expected" placebo response, according to a company statement released Sunday.
Mechanism and Competitive Positioning
Sonelokimab operates through a unique mechanism, binding to two inflammatory cytokines as well as albumin, a third protein involved in hidradenitis suppurativa progression. Moonlake has positioned the drug's targeting approach and small molecular size as potential advantages that could make it more potent and longer-lasting than available biologics including AbbVie's Humira, UCB's Bimzelx, and Novartis' Cosentyx.
Data from earlier-stage testing had suggested sonelokimab possessed an "optimal profile" compared to IL-17 inhibitors like Bimzelx and Cosentyx, according to Leerink Partners analysts in a January report. The company's confidence in its drug was further evidenced by reportedly turning down a buyout offer from Merck & Co. this year.
Analyst Skepticism and Regulatory Uncertainty
The trial results, described by analysts as "disappointing" and "undifferentiated," have significantly dampened prospects for the drug's commercial success. RBC Capital Markets analyst Brian Abrahams noted that the magnitude of effects observed appears "uncompetitive" with Bimzelx, "likely relegating sonelokimab to a much narrower role" while casting doubts on its potential against other diseases.
The competitive landscape has intensified with the 2023 and 2024 approvals of Cosentyx and Bimzelx, respectively, creating pressure for Moonlake to demonstrate not only superiority over placebo but also competitive advantage against these established treatments.
Leerink's Thomas Smith observed that the data have "introduced uncertainty" around Moonlake's approval path and commercial outlook. Stifel analyst Alex Thompson was more direct, stating that a "clear path to approval" is likely "off-the-table in the near term."
Company Response and Next Steps
Despite the setbacks, Moonlake emphasized positive aspects of the data in its statement, noting that pooled results from both studies demonstrated "clinically meaningful and statistically significant improvement" across all trial goals. The company highlighted that in the failed study, placebo recipients responded at a much higher rate than historical data would suggest.
Moonlake plans to engage with regulators to discuss the approval path, including the "analytical strategies" now necessary given the placebo group's unexpected performance. However, multiple Wall Street analysts have expressed skepticism about prospects for quick regulatory clearance and the drug's overall sales potential in the competitive hidradenitis suppurativa market.
The dramatic stock decline reflects investor disappointment in what analysts had viewed as a promising opportunity in the still-untapped hidradenitis suppurativa treatment market, where significant unmet medical needs remain despite recent therapeutic advances.
