Cantor starts MoonLake at OW; PT $23

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Cantor Fitzgerald initiated coverage of MoonLake Immunotherapeutics (NASDAQ:MLTX) with an “overweight” rating and a 12-month price target of $23. The stock closed at $16.30 on Feb. 13.

MoonLake has an IL-17A and IL-17F nanobody asset called, sonelokimab, or SLK, that is currently in Phase 2 trials in hidradenitis suppurativa (HS), a severe skin disease, and psoriatic arthritis (PsA).

“The opportunity for SLK in HS ($5-billion-plus potential market) is the primary driver of our bullish view on MoonLake,” writes analyst Prakhar Agrawal.

“After recent positive Phase 3 trials from competitor IL-17 injectables Cosentyx and bimekizumab (IL-17A/F antibody), we have high confidence that SLK will work in HS and will likely raise the efficacy bar due to its optimal inhibition profile and a nanobody approach,” he added.

Mr. Agrawal said approval of IL-17 injectables over the next few years will significantly expand the HS market and “SLK could be an approximately $1.5-billion drug just in this indication.”

He said SLK also is de-risked in PsA, but “we see most of the commercial opportunity in the post-tumor necrosis factor setting, which is still a large market.”

Bottom line: “We think this is a good entry point and timing for buying MoonLake shares as SLK has a large opportunity in multiple de-risked inflammation indications; the valuation is inexpensive relative to other immunology peers; and [there is] a strong catalyst path over the next 12 months,” Mr. Agrawal said.