mnlk-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-39630

MOONLAKE IMMUNOTHERAPEUTICS

(Exact Name of Registrant as Specified in Its Charter)


Cayman Islands						98-1711963
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

Dorfstrasse 29
6300 Zug
Switzerland						N/A
(Address of principal executive offices)						(ZIP Code)

41 415108022

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A ordinary share, par value $0.0001 per share

MLTX

The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 7, 2024, there were 62,874,637 Class A Ordinary Shares, $0.0001 par value (the "Class A Ordinary Shares"), and 995,267 Class C Ordinary Shares, $0.0001 par value (the "Class C Ordinary Shares"), issued and outstanding.

MOONLAKE IMMUNOTHERAPEUTICS

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2024

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION			2
Item 1. Financial Statements (Unaudited)			2
Condensed Consolidated Balance Sheets			2
Condensed Consolidated Statements of Operations and Comprehensive Loss			3
Condensed Consolidated Statements of Changes In Equity			4
Condensed Consolidated Statements of Cash Flows			6
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			38
Item 4. Controls and Procedures			39
PART II. OTHER INFORMATION			40
Item 1. Legal Proceedings			40
Item 1A. Risk Factors			40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			40
Item 3. Defaults Upon Senior Securities			40
Item 4. Mine Safety Disclosures			40
Item 5. Other Information			40
Item 6. Exhibits			41
SIGNATURES			42

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

MOONLAKE IMMUNOTHERAPEUTICS

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in USD, except share data)


	March 31, 2024 (Unaudited)		December 31, 2023
Current assets
Cash and cash equivalents	$	458,441,051	$	451,169,337
Short-term marketable debt securities	88,613,700		59,838,900


Other receivables	1,495,876		1,056,862
Prepaid expenses - current	5,039,343		2,102,203

Total current assets	553,589,970		514,167,302

Non-current assets
Operating lease right-of-use assets	3,698,514		3,628,480
Property and equipment, net	509,816		320,865
Prepaid expenses - non-current	6,318,838		8,423,468




Total non-current assets	10,527,168		12,372,813
Total assets	$	564,117,138	$	526,540,115

Current liabilities
Trade and other payables	$	3,482,790	$	1,837,684
Short-term portion of operating lease liabilities	1,304,426		1,197,876

Accrued expenses and other current liabilities	4,123,304		6,930,120


Total current liabilities	8,910,520		9,965,680

Non-current liabilities
Long-term portion of operating lease liabilities	2,357,495		2,499,990
Pension liability	462,735		583,426

Total non-current liabilities	2,820,230		3,083,416
Total liabilities	11,730,750		13,049,096
Commitments and contingencies (Note 15)

Equity



Class A Ordinary Shares: $0.0001 par value; 500,000,000 shares authorized; 62,874,637 shares issued and outstanding as of March 31, 2024; 60,466,453 shares issued and outstanding as of December 31, 2023	6,287		6,047
Class C Ordinary Shares: $0.0001 par value; 100,000,000 shares authorized; 995,267 shares issued and outstanding as of March 31, 2024; 2,505,476 shares issued and outstanding as of December 31, 2023	100		251
Additional paid-in capital	670,185,376		609,969,236
Accumulated deficit	(130,331,128)		(116,657,472)
Accumulated other comprehensive income	2,693,096		2,357,621
Total shareholders’ equity	542,553,731		495,675,683
Noncontrolling interests	9,832,657		17,815,336
Total equity	552,386,388		513,491,019
Total liabilities and equity	$	564,117,138	$	526,540,115

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

MOONLAKE IMMUNOTHERAPEUTICS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Amounts in USD, except share and per share data)

(Unaudited)


	Three Months Ended March 31,
	2024		2023


Operating expenses
Research and development	$	(13,014,049)	$	(7,415,097)
General and administrative	(6,806,440)		(5,516,469)
Total operating expenses	(19,820,489)		(12,931,566)
Operating loss	(19,820,489)		(12,931,566)

Other income, net	5,915,220		723,589



Loss before income tax	(13,905,269)		(12,207,977)

Income tax expense	(70,252)		(11,010)
Net loss	$	(13,975,521)	$	(12,218,987)
Of which: net loss attributable to controlling interests shareholders	(13,673,656)		(9,004,856)
Of which: net loss attributable to noncontrolling interests shareholders	(301,865)		(3,214,131)

Net unrealized gain on marketable securities and short term investments	182,273		24,472

Actuarial gain (loss) on employee benefit plans	81,230		(42,144)
Other comprehensive income (loss)	263,503		(17,672)
Comprehensive loss	$	(13,712,018)	$	(12,236,659)
Comprehensive loss attributable to controlling interests shareholders	(13,415,707)		(9,017,481)
Comprehensive loss attributable to noncontrolling interests	(296,311)		(3,219,178)

Weighted-average number of Class A Ordinary Shares, basic and diluted	62,637,212		39,061,977
Basic and diluted net loss per share attributable to controlling interests shareholders	$	(0.22)	$	(0.23)

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

MOONLAKE IMMUNOTHERAPEUTICS

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)

(Amounts in USD, except share data)

(Unaudited)


	Class A Ordinary Shares	Class C Ordinary Shares			Additional Paid-In Capital	Accumulated Deficit	Accumulated Other Comprehensive Income	Total Shareholders' Equity		Noncontrolling Interests		Total Equity
		Shares	Amount															Shares		Amount
Balance at December 31, 2022		38,977,600	$	3,898			13,723,511	$	1,373	$	129,192,291	$	(80,650,212)	$	350,946	$	48,898,296	$	19,868,402	$	68,766,698
Share-based compensation under the equity incentive plan ESPP, ESOP, EIP and reverse vesting of Restricted Founder Shares		—	—				—	—		1,875,992		—		—		1,875,992		701,195		2,577,187
Refund of stamp duty fees		—	—				—	—		3,517		—		—		3,517		1,406		4,923
Net loss for the three months ended March 31, 2023		—	—				—	—		—		(9,004,856)		—		(9,004,856)		(3,214,131)		(12,218,987)
Other comprehensive income		—	—				—	—		—		—		(12,625)		(12,625)		(5,047)		(17,672)
Conversion of MoonLake Class C Ordinary Shares into Class A Ordinary Shares		176,603	18				(176,603)	(18)		237,049		—		1,787		238,836		(238,836)		—
Balance at March 31, 2023		39,154,203	$	3,916			13,546,908	$	1,355	$	131,308,849	$	(89,655,068)	$	340,108	$	41,999,160	$	17,112,989	$	59,112,149

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.


	Class A Ordinary Shares	Class C Ordinary Shares			Additional Paid-In Capital	Accumulated Deficit	Accumulated Other Comprehensive Income	Total Shareholders' Equity		Noncontrolling Interests		Total Equity
		Shares	Amount															Shares		Amount
Balance at December 31, 2023		60,466,453	$	6,047			2,505,476	$	251	$	609,969,236	$	(116,657,472)	$	2,357,621	$	495,675,683	$	17,815,336	$	513,491,019
Share-based compensation under the equity incentive plan ESPP and EIP		—	—				—	—		1,693,101		—		—		1,693,101		(15,893)		1,677,208
Net loss for the three months ended March 31, 2024		—	—				—	—		—		(13,673,656)		—		(13,673,656)		(301,865)		(13,975,521)
Other comprehensive loss		—	—				—	—		—		—		257,949		257,949		5,554		263,503
Conversion of MoonLake Class C Ordinary Shares into Class A Ordinary Shares		1,493,356	149				(1,493,356)	(149)		10,536,980		—		76,603		10,613,583		(10,613,583)		—
Buyback of unvested MoonLake AG Common Shares by MoonLake AG into treasury following an employee contract termination (Note 11)		—	—				—	—		113,154		—		904		114,058		(114,108)		(50)
Capital injection from MoonLake to MoonLake AG (Note 11)		—	—				—	—		(4,667,196)		—		19		(4,667,177)		3,057,216		(1,609,961)
Cancellation of MoonLake Class C Ordinary Shares following an employee contract termination in MoonLake AG (Note 11)		—	—				(16,853)	(2)		2		—		—		—		—		—
Issuance of Class A Ordinary Shares, net of transaction costs (Note 11)		914,828	91				—	—		52,540,099		—		—		52,540,190		—		52,540,190
Balance at March 31, 2024		62,874,637	$	6,287			995,267	$	100	$	670,185,376	$	(130,331,128)	$	2,693,096	$	542,553,731	$	9,832,657	$	552,386,388

MOONLAKE IMMUNOTHERAPEUTICS

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)

(Amounts in USD, except share data)

(Unaudited)

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

MOONLAKE IMMUNOTHERAPEUTICS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in USD)

(Unaudited)


	Three Months Ended March 31, 2024		Three Months Ended March 31, 2023
Cash flow from operating activities
Net loss	$	(13,975,521)	$	(12,218,987)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	22,813		3,290
Share-based compensation expense	1,677,208		2,577,187

Net periodic pension benefit (gain) cost for the qualified pension plan	(272)		(13,271)
Other non-cash items	171,649		97,631
Changes in operating assets and liabilities:
Other receivables	(439,014)		(161,316)


Right-of-use assets	(5,443)		—
Prepaid expenses	(832,510)		1,103,606
Trade and other payables	1,645,106		3,572,431
Operating leases liabilities	(405,575)		(38,825)
Accrued expenses and other current liabilities	(2,806,816)		(3,946,173)


Net cash flow used in operating activities	(14,948,375)		(9,024,427)

Cash flow from investing activities
Purchase of short-term marketable debt securities	(87,713,327)		—
Proceeds from maturities of short-term marketable debt securities	59,120,801		19,648,532
Purchase of property and equipment	(211,765)		—
Net cash flow used in investing activities	(28,804,291)		19,648,532

Cash flow from financing activities

Issuance of Class A Ordinary Shares, net of transaction costs (Note 11)	52,540,190		—
Stamp duty on capital injection from MoonLake to MoonLake AG (Note 11)	(1,562,235)		—





Buyback of unvested MoonLake AG Common Shares by MoonLake AG following an employee contract termination (Note 11)	(50)		—


Net cash flow provided by financing activities	50,977,905		—

Effect of movements in exchange rates on cash held	46,475		(535)
Net change in cash and cash equivalents	7,271,714		10,623,570

Cash and cash equivalents, beginning of period	451,169,337		39,505,627
Cash and cash equivalents, end of period	$	458,441,051	$	50,129,197

Supplementary disclosure of cash flow information:

Non-cash operating lease assets obtained in exchange for lease obligations	$	369,630	$	—

The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

(Amounts in USD, except share and per share data)

(Unaudited)

Note 1 — Overview of the Company

Corporate Information

MoonLake Immunotherapeutics is a clinical stage biotechnology company advancing therapies to address significant unmet needs in inflammatory skin and joint diseases. MoonLake Immunotherapeutics is currently a single asset company focused on the development of Sonelokimab (“SLK”), a novel tri-specific IL-17A and IL-17F inhibiting Nanobody that has the potential, based on response levels seen in clinical trials, to drive disease modification in dermatology and rheumatology patients.

Unless the context otherwise requires, “MoonLake” and the “Company” refer to the combined company following the Business Combination (as defined in Note 2 — Business Combination Agreement with Helix and Recapitalization included in MoonLake’s audited financial statements and notes thereto for the year ended December 31, 2023 included in MoonLake’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission (“SEC”) on February 29, 2024 (the “Annual Report”)) consummated on April 5, 2022, together with its subsidiaries.

Note 2 — Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include those of the Company and its subsidiaries, MoonLake Immunotherapeutics AG, a Swiss stock corporation (Aktiengesellschaft) registered with the commercial register of the Canton of Zug, Switzerland under the number CHE-433.093.536 (“MoonLake AG”), MoonLake Immunotherapeutics Ltd., a private limited company incorporated in the United Kingdom, and MNLK Immunotherapeutics, Unipessoal Lda ("MNLK PT"), a private limited company incorporated in Portugal, after elimination of all intercompany accounts and transactions. The accompanying unaudited condensed consolidated financial statements and notes hereto have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as set forth by the Financial Accounting Standards Board (“FASB”) and in conformity with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the FASB.

In the opinion of management, all material adjustments necessary for a fair presentation of the financial information, which are of a normal and recurring nature, have been made for the interim periods reported. Results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results for the entire fiscal year or any other period. The unaudited condensed consolidated financial information for the three months ended March 31, 2024 and 2023 have been prepared on the same basis as and should be read in conjunction with MoonLake’s audited financial statements and notes thereto for the year ended December 31, 2023 included in the Annual Report.

All amounts are presented in U.S. Dollar (“$”), unless otherwise indicated. The term “Swiss franc” and “CHF” refer to the legal currency of Switzerland, "GBP" refers to the legal currency of the United Kingdom, and “€” and "Euro" refer to the legal currency of Portugal.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses. The significant judgments, estimates and assumptions relevant to the Company relate to:

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

(Amounts in USD, except share and per share data)

(Unaudited)

•determining whether the in-process research and development expenditure (“IPR&D”) has an alternative future use;

•determining assumptions used in estimating the fair value of share-based compensation;

•estimating the recoverability of the deferred tax asset; and

•estimating the amount of accruals in connection with the completion of clinical trial milestones.

The Company bases its judgments and estimates on various factors and information, which may include, but are not limited to, the Company’s forecasts and future plans, current economic conditions and observable market-based transactions of its own shares, the results of which form the basis for making judgments about the carrying value of assets and liabilities and recorded amounts of expenses that are not readily apparent from other sources. To the extent there are material differences between the Company’s estimates and the actual results, the Company’s future results of operation may be affected.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are recorded at cost, which approximates fair value. As of March 31, 2024, the Company considers $189.5 million of short-term marketable debt securities in the form of eurocommercial papers and certificates of deposit to be cash equivalents. As of December 31, 2023, the Company considers $129.4 million of short-term marketable debt securities in the form of eurocommercial papers and certificates of deposit to be cash equivalents.

Marketable securities and short-term investments

The Company invests in short-term marketable securities in the form of debt securities. At the time of purchase, the Company assesses whether such debt security should be classified as held-to-maturity or available-for-sale debt securities.

Debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity debt securities are carried at amortized cost, adjusted for accretion of discounts or amortization of premiums to maturity computed under the effective interest method. Such accretion or amortization is included in “Interest and dividend income”. Marketable debt securities not classified as held-to-maturity are classified as available-for-sale and reported at fair value.

Net unrealized gains and losses on available-for-sale debt securities are excluded from the determination of earnings and are instead recognized in the “Accumulated other comprehensive income” component of shareholders’ equity until realized. Realized gains and losses on available-for-sale debt securities are computed based upon the historical cost of these securities, using the specific identification method.

A decline in the fair value of any security below cost that is deemed other than temporary results in a charge to earnings and the corresponding establishment of a new cost basis for the security. Dividend and interest income are recognized when earned. Realized gains and losses are included in "Other income" and the cost of securities sold is determined using the specific-identification method.

Marketable debt securities are classified as either “Cash and cash equivalents” or “Short‑term marketable debt securities” according to their original maturity at the time of acquisition. Changes in unrealized gains and losses pertaining to cash equivalent securities are added back into the consolidated statements of cash flows as those are excluded from the determination of earnings but impact the cash and cash equivalents position.

Concentration of Credit Risk

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

(Amounts in USD, except share and per share data)

(Unaudited)

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in large financial institutions which, at times, may exceed the CHF 100,000 deposit protection limit in Switzerland, the $250,000 Federal Deposit Insurance Corporation deposit insurance coverage limit in the United States, the GBP 85,000 Financial Services Compensation Scheme deposit protection limit in the United Kingdom, or the €100,000 Fundo de Garantia de Depósitos deposit protection limit in Portugal. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash and cash equivalents are held. Additionally, the Company ensures further protection against credit risk by diversifying its cash holdings across a variety of credit institutions, thereby minimizing the potential impact of any adverse events on a single institution. Further, the Company's investment strategy for cash (in excess of current business requirements) is set to invest in short-term marketable debt securities. Management actively monitors credit risk in the investment portfolio. Credit risk exposures are controlled in accordance with policies approved by the board of directors to identify, measure, monitor and control credit risks.

Fair Value Measurements

The Company follows the guidance included in ASC 820, Fair Value Measurement. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

There are three levels of inputs to fair value measurements:

•Level 1, meaning the use of quoted prices for identical instruments in active markets;

•Level 2, meaning the use of quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or are directly or indirectly observable; and

•Level 3, meaning the use of unobservable inputs. Observable market data is used when available.

Transfers between Levels 1, 2 or 3 within the fair value hierarchy are recognized at the end of the reporting period when the respective transaction occurred.

Segment Information

The Company operates as a single operating segment. The Company’s chief operating decision maker, its Chief Executive Officer, manages the Company’s operations on a stand-alone basis for the purposes of allocating resources and assessing financial performance.

Property and Equipment

Property and equipment, net is stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method based on the estimated useful lives of three to five years. As of March 31, 2024, property and equipment, net relates to information technology, office equipment, and leasehold improvements.

Research and Development Contract Costs and Accruals

Research and development expenses include employee payroll, consulting, contract research and contract manufacturing costs attributable to research and development activities and are expensed as incurred.

Upfront payments and milestone payments made for the licensing of technology are expensed as research and development expenses in the period in which it is probable that a liability has been incurred. Advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.

The Company has entered into various research and development contracts with companies both inside and outside of the United States. These agreements are generally cancellable, and related payments are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research costs. When

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

(Amounts in USD, except share and per share data)

(Unaudited)

evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies or trials, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs.

Share-Based Transaction

Goods or services received in a share-based payment transaction are measured using a fair value-based measure.

Stock-Based Compensation

The Company recognizes compensation expense based on estimated fair values for all stock-based payment awards made to eligible employees, members of the board of directors and independent contractors that are expected to vest.

The valuation of stock option awards is determined at the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires the Company to make assumptions and judgements about the inputs used in the calculations, such as the fair value of the common stock, expected term, expected volatility of the Company’s common stock, risk-free interest rate and expected dividend yield. The valuation of restricted stock awards is measured by the fair value of the Company’s common stock on the date of the grant.

For all stock options granted, the Company calculated the expected term as the period that share-based awards are expected to be outstanding. The estimate of expected volatility is based on comparative companies’ volatility within the Company's industry. The risk-free rate is based on the yield available on United States Treasury zero-coupon issues corresponding to the expected term of the award.

The fair value of the common stock granted under the ESPP (as defined below) has historically been estimated by management with reference to the market-based transaction with its Series A investors, as there was no public market for the common stock.

Share-based payment arrangements are accounted for under the fair value method. Total compensation is measured at grant date, based on the fair value of the award at that date, and recorded in earnings over the period the employees are required to render service. The Company recognizes compensation cost only for those awards expected to meet the service conditions on a straight-line basis over the requisite service period of the award.

Foreign Currency

The functional currency of the Company and its subsidiaries is the U.S. dollar. Balances and transactions denominated in foreign currencies are converted as follows: monetary assets and liabilities are translated using exchange rates in effect at the balance sheet dates and non-monetary assets and liabilities are translated at historical exchange rates. Revenue and expenses are translated at the daily exchange rate on the respective accounting date.

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

Income Taxes

The Company accounts for income taxes by using the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is recorded to the extent it is more likely than not that all or a portion of the Company's deferred tax assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

(Amounts in USD, except share and per share data)

(Unaudited)

tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.

Net Loss per Class A Ordinary Shares

Basic net loss per Class A Ordinary Share is calculated using the two-class method under which earnings are allocated to both Class A Ordinary Shares and participating securities. Basic net loss per share is calculated by dividing the net loss attributable to Class A Ordinary Shares by the weighted-average number of Class A Ordinary Shares outstanding for the period. The diluted net loss per Class A Ordinary Share is computed by dividing the net loss using the weighted-average number of Class A Ordinary Shares and, if dilutive, potential Class A Ordinary Shares outstanding during the period.

In periods in which the Company reports a net loss attributable to shareholders of Class A Ordinary Shares, diluted net loss per share attributable to shareholders of Class A Ordinary Shares is the same as basic net loss per share attributable to shareholders of Class A Ordinary Shares, since dilutive Class A Ordinary Shares are not assumed to be outstanding if their effect is anti-dilutive.

Acquisitions

The Company evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first assessing whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. On April 29, 2021, MoonLake AG entered into an in-licensing agreement (the “In-License Agreement”) with Merck Healthcare KGaA, Darmstadt, Germany (“MHKDG”) to acquire the Sonelokimab program (the “SLK Program”) and determined that substantially all of the fair value of the gross assets acquired related to IPR&D of SLK. Therefore, this transaction was accounted for as an asset acquisition.

IPR&D represents incomplete technologies that the Company acquires, which at the time of acquisition, are still under development and have no alternative future use. The fair value of such technologies is expensed upon acquisition. A technology is considered to have an alternative future use if it is probable that the Company will use the asset in its current, incomplete state as it existed at the acquisition date, in another research and development project that has not yet commenced, and economic benefit is anticipated from that use. If a technology is determined to have an alternative future use, then the fair value of the program would be recorded as an asset on the balance sheet rather than expensed.

Contingent consideration payments (for example milestone payments due upon the occurrence of a specific event) in asset acquisitions are recognized in the period in which it is probable that a liability has been incurred (unless the contingent consideration meets the definition of a derivative, in which case the amount becomes part of the cost in the asset acquired). Upon recognition of the contingent consideration payment, the amount is expensed if it relates to IPR&D or capitalized if it relates to a developed product which is generally considered to be when clinical trials have been completed and regulatory approval obtained.

Future royalty payments due on net sales will be recognized in cost of goods sold when net sales are recognized.

Pension Accounting

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

(Amounts in USD, except share and per share data)

(Unaudited)

The Company accounts for pension assets and liabilities in accordance with ASC 715, Compensation – Retirement Benefits, which requires the recognition of the funded status of pension plans in the Company’s consolidated balance sheet. The liability in respect to defined benefit pension plans is the projected benefit obligation calculated annually by independent actuaries using the projected unit credit method. The projected benefit obligation as of March 31, 2024 represents the actuarial present value of the estimated future payments required to settle the obligation that is attributable to employee services rendered before that date. Service costs for such pension plans, represented in the net periodic pension benefit cost, are included in the personnel expenses of the various functions where the employees are engaged. The other components of net benefit cost are included in the consolidated statements of operations and comprehensive loss separately from the service cost component, in “other income, net.” Plan assets are recorded at their fair value.

Gains or losses arising from plan curtailments or settlements are accounted for at the time they occur. Any net pension asset is limited to the present value of the future economic benefits available to the Company in the form of refunds from the plan or expected reductions in future contributions to the plan. Actuarial gains and losses arising from differences between the actual and the expected return on plan assets are recognized in accumulated other comprehensive income.

Leases

The Company determines if an arrangement is or contains a lease at contract inception. For these arrangements, it is evaluated if the arrangement involves an identified asset that is physically distinct or whether the Company has the right to substantially all of the capacity of an identified asset that is not physically distinct. In arrangements that involve an identified asset, there is also judgment in evaluating if the Company has the right to direct the use of that asset.

MoonLake does not have any finance leases. As of March 31, 2024, the Company has four operating leases related to the office spaces located in (i) Dorfstrasse 29, 6300, Zug, Switzerland (comprised of two leases), (ii) 95 Regent Street, CB2 1AW, Cambridge, England, United Kingdom, and (iii) Rua Manuel Pinto de Azedevo 860, 4150-335, Porto, Portugal. The operating leases are recognized on a straight-line basis over the lease term commencing on the date the Company has the right to use the leased property. Right-of-use assets and lease liabilities are measured at the lease commencement date based on the present value of the remaining lease payments over the lease term, determined using the discount rate for the lease at the commencement date. Because the rate implicit in the leases is not readily determinable, the Company uses the incremental borrowing rate as the discount rate, which approximates the interest rate at which the Company could borrow on a collateralized basis with similar terms and payments and in similar economic environments.

Leases with an initial term of 12 months or less that do not have the option to purchase the underlying asset are not recorded on the balance sheet, with lease expense for these leases recognized on a straight-line basis over the lease term commencing on the date the Company has the right to use the leased property.

Recently Issued Accounting Pronouncements not yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment reporting — Improvements to Reportable Segment Disclosures. This new standard requires public entities to disclose significant segment expenses and additional segment items annually and to provide all reported segment profit or loss and assets disclosures currently required annually on an interim basis. The standard also requires disclosure of the Chief Operating Decision Maker's title and position. The standard does not change the manner in which public entities identify their operating segments, aggregate them, or apply the quantitative thresholds for determining their reportable segments. It is effective for fiscal years beginning after December 15, 2023 and interim periods in fiscal years beginning after December 15, 2024, with early adoption permitted. The company has determined it operates as a single segment, therefore, we do not anticipate this ASU to materially impact our consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income taxes — Improvements to Income Taxes Disclosure. The purpose of this guidance is to enhance the transparency and usefulness of income tax disclosures and provide comprehensive income tax information, particularly in relation to rate reconciliation and income taxes paid in the U.S and foreign jurisdictions. It is effective for fiscal years beginning after December 15, 2024 and interim periods in fiscal

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

(Amounts in USD, except share and per share data)

(Unaudited)

years beginning after December 15, 2024, with early adoption permitted. This ASU will result in the required additional disclosures being included in our consolidated financial statements, once adopted.

Note 3 – Risks and Liquidity

Going Concern, Liquidity and Capital Resources

MoonLake is subject to risks common to companies in the biopharmaceutical industry, and the Company believes that changes in any of the following areas could have a material adverse effect on the Company's future financial position or results of operations: ability to obtain future financing, regulatory approval and market acceptance of, and reimbursement for, product candidates, performance of third-party contract research organizations and manufacturers upon which the Company relies, protection of the Company's intellectual property, litigation or claims against the Company based on intellectual property, patent, product, regulatory, clinical or other factors, and the Company's ability to attract and retain employees necessary to support its growth.

The Company is dependent on third-party manufacturers to supply products for research and development activities in its programs. In particular, the Company relies and expects to continue to rely on a small number of manufacturers to supply the Company with its requirements for the active pharmaceutical ingredients and formulated drugs related to these programs. These programs could be adversely affected by a significant interruption in the supply of active pharmaceutical ingredients and formulated drugs.

The Company's ability to generate revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of SLK in one or more indications, which is expected to take a number of years. The Company expects to continue to incur significant expenses and operating losses for at least the next three years as the Company continues the development of SLK and prepares for commercial launches. It is expected that operating losses will fluctuate significantly from year to year depending on the timing of the Company's planned clinical development programs and efforts to achieve regulatory approval.

The Company incurred a loss of $14.0 million for the three months ended March 31, 2024. As of March 31, 2024, the Company’s current assets exceeded its current liabilities by $544.7 million.

As of March 31, 2024, the Company had $458.4 million of cash and cash equivalents. Based on the Company's current operating plan, management believes that the Company has sufficient capital to fund its operations and capital expenditures until the end of 2026.

Note 4 – Fair Value Measurements

The following table presents information about the Company's short-term marketable debt securities measured at fair value on a recurring basis and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement:


	March 31, 2024				December 31, 2023
	Level 2		Total			Level 2		Total
Eurocommercial Papers	$	188,351,700	$	188,351,700		$	109,608,915	$	109,608,915
Certificates of Deposit	89,804,879		89,804,879			79,626,727		79,626,727
Total	$	278,156,579	$	278,156,579		$	189,235,642	$	189,235,642

Cash and accounts payable approximate their fair values as of March 31, 2024 and December 31, 2023, due to their short-term nature. Pension plan assets fair value is determined based on Level 2 inputs.

Note 5 – Investments

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

(Amounts in USD, except share and per share data)

(Unaudited)

The fair value and amortized cost of investments in short-term marketable debt securities by major security type as of March 31, 2024 are as follows:


	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Eurocommercial Papers	$	186,422,586	$	1,929,114	$	—	$	188,351,700
Certificates of Deposit	88,830,866		974,013		—		89,804,879
Total	$	275,253,452	$	2,903,127	$	—	$	278,156,579
Of which classified within cash and cash equivalents	187,540,125		2,002,754		—		189,542,879
Of which classified within short-term marketable debt securities	87,713,327		900,373		—		88,613,700

The following table presents the changes in fair values of the Company’s short-term marketable debt securities, classified as Level 2 financial assets, and recognized in accumulated other comprehensive income:


Beginning balance, January 1, 2024	$	2,720,854
Other comprehensive income before reclassifications	3,748,517
Amounts reclassified from accumulated other comprehensive income	(3,566,244)

Ending balance, March 31, 2024	$	2,903,127

As of March 31, 2024, the Company’s marketable debt securities maturities are all due within one year.

Note 6 — Prepaid Expenses


Prepaid expenses - current	March 31, 2024		December 31, 2023
Supply and manufacturing services	$	2,104,629	$	1,205
Non-clinical research and clinical development services	1,719,840		842,729
Insurance	574,676		1,077,478
Other prepayments	640,198		180,791

Total	$	5,039,343	$	2,102,203

Prepaid expenses - non-current	March 31, 2024		December 31, 2023
Supply and manufacturing services	$	6,318,838	$	8,423,468
Total	$	6,318,838	$	8,423,468

Prepaid expenses - current (Supply and manufacturing services) and Prepaid expenses - non-current relate to advance payments made to a contract manufacturing organization pursuant to a manufacturing run reservation agreement for the commercial-scale manufacturing of SLK in 2025.

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

(Amounts in USD, except share and per share data)

(Unaudited)

Note 7 — Trade and Other Payables


	March 31, 2024		December 31, 2023
Consulting and advisory services	$	1,629,694	$	80,695
Supply and manufacturing fees payable	1,024,172		553,459
Research and development services and license fees	431,242		911,454
Legal advisory fees payable	193,640		47,095
Other payables	204,042		244,981


Total	$	3,482,790	$	1,837,684

Note 8 — Accrued Expenses and Other Current Liabilities


	March 31, 2024		December 31, 2023
Bonuses and related employees compensation expenses	$	1,201,586	$	2,780,219
Supply and manufacturing services	912,052		1,603,739
Tax liabilities	851,475		367,976
Research and development services and license fees	727,210		1,226,281
Consultant and other fees	364,184		853,905
Legal fees	66,797		98,000
Total	$	4,123,304	$	6,930,120

Note 9 — Leases

In August 2021, the Company entered into an open-ended office lease agreement, effective November 1, 2021, to lease approximately 2,300 square feet of space on the last two floors of the building located at Dorfstrasse 29, 6300 Zug, Switzerland. The Company estimated the effective duration of the lease at inception and determined a period of 3 years, with expected expiration in November 2024. In December, 2023, the contract was extended, leading to a new estimated effective duration of the lease period of 3 years, with expected expiration in January 2027.

On October 9, 2023, the Company entered into an office lease agreement, effective as of October 9, 2023, to lease approximately 3,900 square feet of office space on the fifth floor of the building located at Rua Manuel Pinto de Azedevo 860, 4150-335, Porto, Portugal. This lease has a 3-year initial term, with two extendable periods of 3 years each. It is expected to be extended once until October 2029.

On October 13, 2023, the Company entered into an office lease agreement, effective as of October 16, 2023, to lease approximately 6,000 square feet of office space on the first floor of the building located at 95 Regent Street, CB2 1AW, Cambridge, England, United Kingdom. This lease has a 3-year term agreement and is set to expire in October 2026.

On December 12, 2023, the Company entered into an open-ended office lease agreement, effective as of January 15, 2024, to lease approximately 1,700 square feet of additional office space at its existing corporate headquarters located at Dorfstrasse 29, 6300 Zug, Switzerland. The Company estimated the duration of the lease at inception and determined a 3-year term.

The weighted average remaining lease term and weighted average discount rate for the operating leases as of March 31, 2024 and December 31, 2023 were as follows:

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

(Amounts in USD, except share and per share data)

(Unaudited)


	March 31, 2024		December 31, 2023
Weighted average remaining lease term (in months)	36		39
Weighted average discount rate	4.8	%	4.9	%

The future minimum annual lease payments under these operating leases as of March 31, 2024 are as follows:


Year ending December 31,	Amount
Remainder of fiscal 2024	$	1,082,561
2025	1,443,415
2026	1,132,061
2027	93,510
2028	93,510
Thereafter	64,351
Total lease payments	3,909,408
Less imputed interest	(247,487)
Total lease liability	3,661,921
Less current portion of lease liability	(1,304,426)
Long-term portion operating lease liability	$	2,357,495

The Company recorded lease expense related to its operating leases of $348,540 and $38,825 for the periods ended March 31, 2024 and March 31, 2023, respectively. Operating cash outflows for amounts included in the measurement of lease liabilities was $364,173 and 38,825 for the periods ended March 31, 2024 and March 31, 2023.

Note 10 — Employee Benefit Plans

The Company operates a defined benefit pension plan in Switzerland (the "Plan”) and a defined contribution pension plan in the United Kingdom and Portugal, in accordance with local regulations and practices. As of March 31, 2024 the Plan covers the Company’s employees in Switzerland with benefits in the event of death, disability, retirement, or termination of employment.

Components of Net Periodic Benefit Cost under the Plan


	Three months ended March 31, 2024		Three months ended March 31, 2023
Service cost	$	70,762	$	29,802
Interest cost	8,347		7,442
Expected return on plan assets	(15,263)		(8,871)

Amortization of unrecognized loss	2,596		—
Prior service cost / (credit) recognized in current year	(

SEC Form 10-Q filed by MoonLake Immunotherapeutics