Soleno Therapeutics (NASDAQ: SLNO) stock is on the rise on Wednesday after the company reported positive feedback from the US Food and Drug Administration (FDA). This feedback pertained to Soleno’s efforts to develop its once-daily Diazoxide Choline Controlled-Release (DCCR) extended-release tablets for the treatment of Prader-Willi syndrome (PWS).
Earlier this year, Soleno submitted a proposal to add a randomized withdrawal period to Study C602 in order to obtain additional controlled data requested by the FDA to support a New Drug Application (NDA).
Soleno said the FDA has acknowledged that data from a proposed randomized withdrawal phase of Study C602 would have the potential to address its concerns regarding the adequacy of the overall efficacy data supportive of an NDA submission for DCCR.
The randomized withdrawal period of the study is expected to take place in the current quarter, with top-line data expected in the first quarter of 2023.
What is Soleno Therapeutics?
Soleno Therapeutics is a clinical-stage biopharmaceutical company based out of Redwood City, California.
The company focuses on the development and commercialization of novel therapeutics for the treatment of rare diseases. Its lead candidate is DCCR, a once-daily oral tablet for the treatment of PWS, which is being evaluated in an ongoing Phase III clinical development program.
The company, which was founded in 1999, was formerly known as Capnia and changed its name to Soleno Therapeutics in May 2017.
What is PWS?
The hallmark symptom of PWS is hyperphagia, a chronic feeling of insatiable hunger that severely diminishes the quality of life for patients and their families. Sufferers can also face symptoms such as behavioral problems, cognitive disabilities, low muscle tone, short stature, the accumulation of excess body fat, developmental delays and incomplete sexual development.
DCCR is intended to treat the issue of hyperphagia in PWS patients, as well as symptoms such as aggressive/destructive behaviors, fat mass and other metabolic parameters.
How Does Soleno Therapeutics Make Money?
Soleno Therapeutics has yet to return any revenue as DCCR, its primary candidate, remains at the clinical stage. This means that, for the meantime, the company is reliant on other sources for working capital.
Most recently, the business closed a $15m public offering on 31 March 2022.
SLNO Stock Financials
Soleno Therapeutics has a price to book ratio of 0.84, compared to an average for the biotechnology and pharmaceuticals sector of 9.59. This appears to indicate that the stock could be undervalued.
On 31 March 2022, Soleno had cash and cash equivalents of approximately $29.0m, compared to $21.3m at the start of the year. The most recent period saw the company achieve a total comprehensive loss of $5.73m.
The year to date has seen the company’s share price decline by more than 50%, with the current price of $0.21 is far below the $4 price the stock sat at in May 2020.
SLNO Investment Risks
There are risks inherent with investing in a healthcare company which has not yet reached the commercial stage. Clearly, it is possible that SLNO’s candidates under development will fail to gain regulatory approvals or fail to reach the commercial stage for some other reason.
Equally, there is a possibility that unforeseen costs or delays might mean Soleno runs out of money before reaching the commercial stage. Even at commercial stage, the company could encounter lower than anticipated demand or other problems relating to sales.
However, Soleno appears to be well prepared for this stage of its lifecycle. The company has already attracted significant support from patient advocacy organizations and the PWS community, with a petition to FDA Leadership requesting regulatory flexibility for DCCR attracting more than 26,000 signatures.
This, along with ‘town hall’ meetings for families to discuss the impact of DCCR, appear to indicate significant demand for the candidate.
SLNO Growth Potential
The Prader-Willi Syndrome Association USA estimates that PWS occurs in one in every 15,000 live births in the US. There are currently no approved therapies to treat the hyperphagia/appetite, metabolic, cognitive function or behavioral aspects of the disorder, which are seen as the primary difficulties faced by patients and their families.
This means direct competition for Soleno is low. Additionally, diazoxide choline has received Orphan Drug Designation for the treatment of PWS in the US and EU, as well as Fast Track Designation in the US. The company has the global market opportunity of its PWS treatment pegged at more than $1bn.
It’s also worth noting that DCCR has substantial potential upsides with other rare disease indications. These include syndromic obesity conditions which the company estimates could affect more than 300,000 Americans.
Is SLNO a Good Investment?
Soleno Therapeutics is making solid progress in meeting regulatory requirements with its treatment for PWS. The company appears to be moderately well-funded, with an impactful candidate and significant demand from potential customers.
These factors, along with the low cost of the stock and consequent possibility for strong returns, make the business look like an intriguing investment.
However, investing in clinical stage businesses is always a risk. The business is vulnerable to funding problems, regulatory issues and struggles with commercialization. Additionally, the huge drop in share price seen over the last couple of years will make the stock unattractive to many potential backers.
Investors should consider their personal risk appetite before putting their money into SLNO stock.
