Moonlake’s Clinical Triumph – Clear Street Bets Big on the Next Biotech Unicorn

MoonLake Immunotherapeutics has made the point that biotech stories rarely follow a straight line more vividly than most. A short while ago, this Swiss company was being hailed as a potential unicorn, a ground-breaking treatment pipeline, and the subject of a rumored Merck acquisition interest at a reported valuation of more than $3 billion. These are the kinds of breathless terms that the industry saves for its most promising moments. Investors were observing. Optimistic models were being built by analysts. Following the release of the VELA trial results, about 88% of the company’s market value vanished during a single trading session.

In any industry, that kind of collapse is terrible. It’s practically standard in biotech, and it’s the part that never quite gets easier to accept. The purpose of the VELA-1 and VELA-2 studies was to demonstrate the effectiveness of MoonLake’s lead antibody, sonelokimab, which targets hidradenitis suppurativa, a chronic skin condition that results in painful lesions and significantly lowers quality of life for those who have it. VELA-1 clearly outperformed a placebo. VELA-2 failed. Surprisingly, the placebo arm did well, reducing the statistical difference until it practically disappeared. On the same day, RBC lowered its price target from $67 to $10. Stifel dropped from $77 to $13. The dream was over, or at least the version that had existed the previous week.

The fact that the story didn’t end there is what makes the present moment intriguing and truly difficult to assess. The financial services and brokerage company Clear Street recently increased its price target for MoonLake from $45 to $70 while keeping its buy rating on a stock that is currently trading at about $18. Some investors lean forward in their seats when there is a difference between the current price and the analyst target. Given that the last time analyst optimism outpaced MoonLake’s stock price, the outcome was one of the most agonizing single-day collapses in recent biotech history, it’s also the kind of thing that makes others extremely skeptical.

Clear Street’s call centers are based on data from an entirely different drug. In a Phase 3b trial for psoriatic arthritis, UCB’s Bimzelx, a biologic that targets IL-17A and IL-17F, recently showed statistically significant superiority over Skyrizi on the ACR50 endpoint at week 16. That outcome is significant to people outside the field of immunology because Skyrizi targets IL-23, a different point in the inflammatory pathway, and outperforming it in joint-related outcomes is not insignificant.

MoonLake’s medication, sonelokimab, targets the same IL-17A/F pathway as Bimzelx. The reasoning behind Clear Street’s strategy is that if Bimzelx can outperform Skyrizi in treating psoriatic arthritis, sonelokimab, which uses a similar mechanism, might be able to produce results that are on par with or better in its next Izar-2 trial update. It’s a logical conclusion. It’s not a given.

Some immunology researchers believe that the IL-17 vs. IL-23 controversy has been lurking in the background of this field for years and that the Bimzelx superiority data may bring it to light. The pathway sonelokimab targets may be more directly relevant to joint disease than the IL-23 route that Skyrizi and similar drugs have dominated, according to proteomics data from patients with inflamed joints that show limited IL-23 expression alongside high IL-17 expression, especially IL-17F. If the Izar-2 results follow that biological logic, MoonLake’s pipeline may appear much more valuable than its current stock price suggests. If it doesn’t hold—if the Izar-2 data fall short of what VELA-2 did—the repercussions would be severe and foreseeable.

As this develops, it’s difficult to ignore the unique tension that surrounds a business attempting to restore credibility following a disastrous data readout. Since VELA, MoonLake’s management has been cautious in its public remarks, highlighting the safety profile of sonelokimab and the encouraging results of the trials while pointing to ongoing research in psoriasis and psoriatic arthritis as the next phase.

That framing is appropriate for a professional setting. It is also, unavoidably, the framing of a business that must persuade the market to give it another look before the money or patience runs out. Strong returns on the stock over the last three months indicate that some investors are already pulling back, possibly due to the competitive IL-17 data that Clear Street mentioned.

The immunology industry is still very competitive in this larger context. The opportunity for a smaller business to carve out a unique niche in a crowded therapeutic market is limited, and AbbVie and UCB are not standing still. Sonelokimab may play a significant role in psoriatic arthritis in particular, where the IL-17F targeting argument is most persuasive due to joint involvement.

It’s also possible that before MoonLake can establish the necessary clinical track record, the industry further solidifies around the well-established titans. Big Pharma has a long history of revisiting assets after the market has marked them down, especially when the underlying biology still holds up, so the once-close Merck acquisition discussion now seems far off, but it is still possible. Which version of this story is told will depend on MoonLake’s upcoming data readouts.