Why MoonLake Immunotherapeutics Stock Skyrocketed This Week

What happened

Shares of the clinical-stage biotech MoonLake Immunotherapeutics (NASDAQ:MLTX) jumped by an eye-popping 78.8% over the first three and a half days of trading this week, according to data provided by S&P Global Market Intelligence. The big gain came after the company announced positive mid-stage trial results for the nanobody sonelokimab in patients with moderate to severe hidradenitis suppurativa (HS).

So what

HS is a chronic skin condition characterized by painful lumps deep under the skin. Although HS is fairly uncommon in the general population, Wall Street still thinks an effective drug for this indication could rake in several hundred million in annual sales. Sonelokimab, for its part, has the potential to become the standard of care in this setting based on its strong mid-stage results.

This sizable commercial opportunity prompted multiple analysts to issue upgrades on MoonLake's stock following these positive phase 2 results. Following these analyst upgrades, however, the latest 12-month consensus price target for the biotech's stock only implies an upside potential of 0.009%. Hence, most analysts covering the stock appear to think it is fairly valued following this double-digit run-up this week.

Now what

Is MoonLake's stock still a buy? Despite this quantum leap in its share price, MoonLake's stock might still be a bargain. Additional data from sonelokimab's broader clinical program are due out later this year, and immunology has been a red-hot area for business development of late. Moreover, the company shouldn't need to tap the public markets again after raising $400 million in gross proceeds this week.

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George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.