MoonLake Immunotherapeutics

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2024, appearing elsewhere in this quarterly report (“Quarterly Report”) on Form 10-Q, and with MoonLake’s audited financial statements and notes thereto for the year ended December 31, 2023 included in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 29, 2024 (our “Annual Report”). Our unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2024 were prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and presented in United States dollars ($).

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2024, appearing elsewhere in this quarterly report (“Quarterly Report”) on Form 10-Q, and with MoonLake’s audited financial statements and notes thereto for the year ended December 31, 2023 included in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 29, 2024 (our “Annual Report”). Our unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2024 were prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and presented in United States dollars ($).

Previous wording

In May 2022, we initiated a Phase 2b trial of SLK in patients with moderate-to-severe HS (the MIRA trial (M1095-HS-201)), and in June 2023, we announced positive top-line results from this trial, which met its primary endpoint of Hidradenitis Suppurativa Clinical Response (“HiSCR”) 75. In October 2023, we announced positive 24-week top-line results showing that the maintenance treatment with SLK led to further improvements in HiSCR75 response rates and other clinically relevant outcomes in patients with moderate-to-severe HS. In February 2024, we announced the successful outcome of our end-of-Phase 2 interactions with the U.S. Food and Drug Administration (“FDA”), as well as positive feedback from our interactions with the E.U. European Medicines Agency (“EMA”), with both regulatory bodies unanimously supporting our proposed approach for advancing our Phase 3 program of SLK in HS. Building on the robust clinical data generated to date, we expect to commence Phase 3 clinical trials in HS in the second quarter of 2024.

Current wording

In May 2022, we initiated a Phase 2b trial of SLK in patients with moderate-to-severe HS (the MIRA trial (M1095-HS-201)), and in June 2023, we announced positive top-line results from this trial, which met its primary endpoint of Hidradenitis Suppurativa Clinical Response (“HiSCR”) 75. In October 2023, we announced positive 24-week top-line results showing that the maintenance treatment with SLK led to further improvements in HiSCR75 response rates and other clinically relevant outcomes in patients with moderate-to-severe HS. In February 2024, we announced the successful outcome of our end-of-Phase 2 interactions with the U.S. Food and Drug Administration (“FDA”), as well as positive feedback from our interactions with the E.U. European Medicines Agency (“EMA”), with both regulatory bodies unanimously supporting our proposed approach for advancing our Phase 3 program of SLK in HS. In May 2024, we announced the screening of the first patients in our Phase 3 program of SLK in HS.

Previous wording

In December 2022, we initiated a Phase 2b trial in patients with active PsA (the ARGO trial (M1095-PSA-201)), and in November 2023, we announced positive top-line results from this trial, which met its primary endpoint of American College of Rheumatology (“ACR”) 50. In March 2024, we announced positive 24-week data from the ARGO trial in PsA showing that continued treatment with SLK led to significant improvements across all key outcomes. We expect to hold end-of-Phase 2 interactions with the FDA and the EMA in mid-2024 and to commence Phase 3 clinical trials in PsA in the second half of 2024.

Current wording

In December 2022, we initiated a Phase 2b trial in patients with active PsA (the ARGO trial (M1095-PSA-201)), and in November 2023, we announced positive top-line results from this trial, which met its primary endpoint of American College of Rheumatology (“ACR”) 50. In March 2024, we announced positive 24-week data from the ARGO trial in PsA showing that continued treatment with SLK led to significant improvements across all key outcomes. In June 2024, we announced the successful outcome of our end-of-Phase 2 interactions with the FDA, as well as positive feedback from our interactions with the EMA, with both regulatory bodies unanimously supporting our proposed approach for advancing our Phase 3 program of SLK in PsA. We expect to commence Phase 3 clinical trials in PsA in the second half of 2024.

Previous wording

As of March 31, 2024, we had $458.4 million of cash and cash equivalents. Based on our current operating plans, we believe that our existing cash, cash equivalents and short-term marketable securities, together amounting to $547.1 million, will be sufficient to fund our operating expenses and capital expenditure requirements until the end of 2026.

Current wording

As of June 30, 2024, we had $342.8 million of cash and cash equivalents. Based on our current operating plans, we believe that our existing cash, cash equivalents and short-term marketable securities, together amounting to $519.8 million, will be sufficient to fund our operating expenses and capital expenditure requirements until the end of 2026.

Previous wording

On June 27, 2023, in connection with the Offering (as defined below), we reduced the maximum aggregate offering amount of our Class A Ordinary Shares that could be issued and sold under the May 2023 Sales Agreement to $0 and no longer intend to sell Class A Ordinary Shares under the May 2023 Sales Agreement unless we file a further prospectus supplement indicating an amount of shares proposed to be sold.

Current wording

On June 27, 2023, we reduced the maximum aggregate offering amount of our Class A Ordinary Shares that could be issued and sold under the May 2023 Sales Agreement to $0 and no longer intend to sell Class A Ordinary Shares under the May 2023 Sales Agreement unless we file a further prospectus supplement indicating an amount of shares proposed to be sold.

Previous wording

For the year ended December 31, 2023, we sold 1,070,818 Class A Ordinary Shares through the Sales Agreements for gross proceeds of $47 million. In the three months ended March 31, 2024, we sold 914,828 Class A Ordinary Shares under the August 2023 Sales Agreement at a weighted average share price of $58.31, for aggregate net proceeds of approximately $52.5 million, after deducting sales agent's commissions and transaction costs . As of March 31, 2024, the total number of shares sold under the August 2023 ATM Sales Agreement is 1,440,752 for total gross proceeds of $85.0 million.

Current wording

For the year ended December 31, 2023, we sold 1,070,818 Class A Ordinary Shares through the Sales Agreements for net proceeds of $46 million, after deducting sales agent's commission and transaction costs. In the three months ended March 31, 2024, we sold 914,828 Class A Ordinary Shares under the August 2023 Sales Agreement at a weighted average share price of $58.31, for aggregate net proceeds of approximately $53 million. In the three months ended June 30, 2024, there were no sales under the August 2023 Sales Agreement. As of June 30, 2024, the total number of shares sold under the August 2023 ATM Sales Agreement was 1,440,752 for total net proceeds of $84 million.

Previous wording

The successful development of SLK is highly uncertain. We expect to incur significant research and development expenses for the foreseeable future as we continue the development and manufacturing partnerships for SLK, conduct research activities and potentially expand our pipeline by pursuing additional indications for SLK or including new product candidates in our portfolio. We cannot determine with certainty the timing of initiation, the duration, or the completion costs of current or future research studies and clinical trials of SLK due to the inherently unpredictable nature of research activities and clinical development. Clinical development timelines, the probability of success and the development costs can differ materially from expectations. We anticipate that we will make determinations as to which indications to pursue and how much funding to direct to each indication on an ongoing basis in response to the results of ongoing and future research studies and clinical trials, regulatory developments, and our ongoing assessments as to each indication’s commercial potential. Our clinical development costs are expected to increase significantly with the commencement of our Phase 3 clinical trials.

Current wording

The successful development of SLK is highly uncertain. We expect to incur significant research and development expenses for the foreseeable future as we continue the development and manufacturing partnerships for SLK, conduct research activities and potentially expand our pipeline by pursuing additional indications for SLK or including new product candidates in our portfolio. We cannot determine with certainty the timing of initiation, the duration, or the completion costs of current or future research studies and clinical trials of SLK due to the inherently unpredictable nature of research activities and clinical development. Clinical development timelines, the probability of success and the development costs can differ materially from expectations. We anticipate that we will make determinations as to which indications to pursue and how much funding to direct to each indication on an ongoing basis in response to the results of ongoing and future research studies and clinical trials, regulatory developments, and our ongoing assessments as to each indication’s commercial potential.

Previous wording

Gain or losses from foreign currency translation are included in "other income, net" in the unaudited condensed consolidated statements of operations and comprehensive loss. We recognized a foreign currency transaction loss of $59,541 for the three months ended March 31, 2024. For the three months ended March 31, 2023, we recognized a foreign currency transaction gain of $171,809.

Current wording

Gains or losses from foreign currency translation are included in "other income, net" in the unaudited condensed consolidated statements of operations and comprehensive loss. We recognized a foreign currency transaction loss of $39,293 and $98,834 for the three and six months ended June 30, 2024, respectively. For the three and six months ended June 30, 2023, we recognized a foreign currency transaction gain of $108,844 and $280,652, respectively.

Previous wording

Research and development expenses were $13.0 million for the three months ended March 31, 2024, compared to $7.4 million for the three months ended March 31, 2023. The increase of $5.6 million primarily related to an increase of $3.9 million in expenses pertaining to clinical development trials with CROs for the upcoming commencement of the Phase 3 clinical trials in HS, an increase of $0.9 million related to supply and logistic services for clinical development trials, and an increase of $0.7 million in personnel-related costs to support the research and development effort.

Current wording

Research and development expenses were $23.7 million for the three months ended June 30, 2024, compared to $8.7 million for the three months ended June 30, 2023. The increase of $15.0 million primarily related to an increase of $9.4 million in expenses pertaining to clinical development trials with CROs for the commencement of the Phase 3 clinical trials in HS, an increase of $4.0 million related to supply and logistic services for clinical development trials, an increase of $1.4 million and $0.5 million in personnel-related costs and consulting expenses, respectively, to support the research and development effort.

Previous wording

Other income, net was $5.9 million for the three months ended March 31, 2024, compared to $0.7 million for the three months ended March 31, 2023. The increase of $5.2 million primarily related to an increase of $5.5 million in realized interest on cash held in bank and cash investments in short-term marketable debt securities.

Current wording

Other income, net was $5.9 million for the three months ended June 30, 2024, compared to $0.8 million for the three months ended June 30, 2023. The increase of $5.1 million primarily related to an increase of $5.3 million in realized interest on cash held in bank and cash investments in short-term marketable debt securities.

Previous wording

Income tax expense was $70,252 for the three months ended March 31, 2024, compared to $11,010 for the three months ended March 31, 2023. The expense is related to corporate income tax of our U.K. and Portugal subsidiaries in 2024 and of our U.K subsidiary in 2023.

Current wording

Income tax expense was $78,701 for the three months ended June 30, 2024, compared to $10,149 for the three months ended June 30, 2023. The expense is related to corporate income tax of our U.K. and Portugal subsidiaries in 2024 and of our U.K subsidiary in 2023.

Previous wording

Other comprehensive income was $263,503 for the three months ended March 31, 2024, compared to other comprehensive loss of $17,672 for the three months ended March 31, 2023. The increase in income of $281,175 primarily related to an increase in net unrealized gain in short-term marketable debt securities of $157,801, and the actuarial gain on employee benefit plans of $123,374.

Current wording

Other comprehensive income was $0.6 million for the three months ended June 30, 2024, compared to other comprehensive loss of $0.4 million for the three months ended June 30, 2023. The increase in income of $1.0 million primarily related to an increase in net unrealized gain in short-term marketable debt securities of $1.1 million.

Previous wording

General and administrative expenses were $6.8 million for the three months ended March 31, 2024, compared to $5.5 million for the three months ended March 31, 2023. The increase of $1.3 million primarily related to an increase of $0.6 million in expenses for advisory services to support organizational growth and operating as a large-accelerated filer, an increase of $0.8 million in personnel-related costs to support organizational growth, an increase of $0.4 million in office expenses driven by the new leases for additional office space, and an increase of $0.2 million in market research expenses. The increases were partially offset by a decrease of $0.7 million in share-based compensation due to the restricted founder shares becoming fully vested in April 2023.

Current wording

General and administrative expenses were $13.7 million for the six months ended June 30, 2024, compared to $10.0 million for the six months ended June 30, 2023. The increase of $3.7 million primarily related to an increase of $1.6 million in personnel-related costs to support organizational growth, an increase of $1.9 million in expenses for advisory and professional services to support organizational growth and operating as a large-accelerated filer, and an increase of $0.7 million in office expenses driven by the new leases for additional office space. The increases were partially offset by a decrease of $0.6 million in share-based compensation due to the restricted founder shares becoming fully vested in April 2023.

Previous wording

For the three months ended March 31, 2024, we incurred a loss of $14.0 million, which includes non-cash items such as share-based compensation expense, and a cash outflow from operations of $14.9 million. As of March 31, 2024, we had a total of $547.1 million in cash, cash equivalents and short-term marketable securities. Based on our current operating plans, we believe our available cash, cash equivalents and short-term marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements until the end of 2026.

Current wording

For the six months ended June 30, 2024, we incurred a loss of $38.7 million, which includes non-cash items such as share-based compensation expense, and a cash outflow from operations of $42.8 million. As of June 30, 2024, we had a total of $519.8 million in cash, cash equivalents and short-term marketable securities. Based on our current operating plans, we believe our available cash, cash equivalents and short-term marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements until the end of 2026.

Previous wording

We expect to incur significant expenses and operating losses for at least the next three years, assuming we continue the clinical development of, and seek regulatory approval for, our product candidate under an in-licensing agreement. It is expected that operating losses will fluctuate significantly from year to year due to the timing of clinical development programs, efforts to achieve regulatory approval, and sales and marketing efforts. We will require substantial additional funding to bring our product candidate to market and support our continuing operations. Until such time that we can generate significant revenue from product sales or other sources, if ever, we expect to finance our operations through the sale of equity, debt financings, or other capital sources, which may include income from collaborations, strategic partnerships, or marketing, distribution, licensing or other strategic arrangements with third parties, or from grants. If we are unable to acquire additional capital or resources, we will be required to modify our operational plans to fund our operating expense requirements. Refer to “Risk Factors — Risks Related to Our Limited Operating History, Business,

Current wording

We expect to incur significant expenses and operating losses for at least the next three years, assuming we continue the clinical development of, and seek regulatory approval for, our product candidate under an in-licensing agreement. It is expected that operating losses will fluctuate significantly from year to year due to the timing of clinical development programs, efforts to achieve regulatory approval, and sales and marketing efforts. We will require substantial additional funding to bring our product candidate to market and support our continuing operations. Until such time that we can generate significant revenue from product sales or other sources, if ever, we expect to finance our operations through the sale of equity, debt financings, or other capital sources, which may include income from collaborations, strategic partnerships, or marketing, distribution, licensing or other strategic arrangements with third parties, or from grants. If we are unable to acquire additional capital or resources, we will be required to modify our operational plans to fund our operating expense requirements. Refer to “Risk Factors — Risks Related to Our Limited Operating History, Business, Financial Condition, and Results of Operations” in our Annual Report for further details related to the risk of raising additional capital to fund our operations.

Previous wording

Net cash used in operating activities was $14.9 million and $9.0 million for the three months ended March 31, 2024 and March 31, 2023, respectively. The increase of net cash used in operating activities of 5.9 million was primarily driven by the increase in operating loss of $1.8 million, the increase in cash paid for changes in prepaid expenses of 1.9 million, and the increase in cash paid for changes in trade and other payables of 1.9 million.

Current wording

Net cash used in operating activities was $42.8 million and $21.2 million for the six months ended June 30, 2024 and June 30, 2023, respectively. The increase of net cash used in operating activities of $21.6 million was primarily driven by the increase in operating loss of $14.2 million, the increase in cash paid for changes in prepaid expenses of $9.2 million, and the decrease in cash from changes in trade and other payables of $0.8 million. The increases were partially offset by a decrease in cash paid for changes in accrued expenses and other current liabilities of $3.5 million.

Previous wording

During the three months ended March 31, 2024, net cash used in investing activities was $28.8 million, consisting predominantly of $87.7 million related to the purchase of short-term marketable debt securities, partially offset by $59.1 million in proceeds received from maturities of short-term marketable debt securities with original maturities longer than three months, and an increase of $0.8 million in unrealized interest pertaining to short-term marketable debt securities with original maturities less than three months. During the three months ended March 31, 2023, net cash provided by investing activities was $19.6 million related to the maturities of the principal of short-term marketable debt securities with original maturities longer than three months.

Current wording

During the six months ended June 30, 2024, net cash used in investing activities was $116.5 million, consisting predominantly of $174.2 million related to the purchase of short-term marketable debt securities, partially offset by $57.8 million in proceeds received from maturities of short-term marketable debt securities with original maturities longer than three months. During the six months ended June 30, 2023, net cash provided by investing activities was $32.3 million and related to the maturities of the principal of short-term marketable debt securities with original maturities longer than three months.

Previous wording

During the three months ended March 31, 2024, net cash provided by financing activities was $51.0 million consisting primarily of $52.5 million in net proceeds from the shares sold under the August 2023 Sales Agreement.

Current wording

During the six months ended June 30, 2024, net cash provided by financing activities was $51.0 million consisting primarily of $52.5 million in net proceeds from the shares sold under the August 2023 Sales Agreement.

Previous wording

(2)We have committed ourselves to four leases, with terms that commenced on November 1, 2021, October 9, 2023, October 13, 2023, and January 15, 2024. We have accounted for the office lease arrangements as operating leases under the guidance ASU 2016-02, Leases Topic 842 through the unaudited condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024. The future lease commitments relate to the office leases for our headquarters in Zug, Switzerland, Cambridge, United Kingdom, and Porto, Portugal, and reflect minimum payments due.

Current wording

(2)We have committed ourselves to four leases, with terms that commenced on November 1, 2021, October 9, 2023, October 13, 2023, and January 15, 2024. We have accounted for the office lease arrangements as operating leases under the guidance ASU 2016-02, Leases Topic 842 through the unaudited condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2024. The future lease commitments relate to the office leases for our headquarters in Zug, Switzerland, Cambridge, United Kingdom, and Porto, Portugal, and reflect minimum payments due.