Executive Summary / Key Takeaways

• Soleno Therapeutics has transitioned from a clinical-stage company to a commercial entity with the recent FDA approval of VYKAT XR, the first-ever treatment for hyperphagia in Prader-Willi Syndrome (PWS) patients aged four and older.
• VYKAT XR's differentiated profile, including its once-daily oral dosing and favorable label without a boxed warning or REMS program, positions it strongly against potential future competitors and addresses a significant unmet need.
• Early U.S. launch metrics, including 268 patient start forms and 131 unique prescribers within the first month, indicate encouraging initial uptake, though management expects revenue to ramp up modestly due to typical market access timelines.
• The company possesses a solid liquidity position of $290 million in cash and marketable securities as of March 31, 2025, supplemented by access to significant additional debt tranches post-approval, which management believes is sufficient to fund operations through cash flow breakeven.
• Key factors for investors to monitor include the pace of patient conversion from start forms to paid prescriptions, the timeline and breadth of payer coverage policy implementation, and progress on the planned EMA submission for European market access.

A New Chapter Begins: Addressing the Unmet Need in Prader-Willi Syndrome

Soleno Therapeutics stands at a pivotal juncture, having recently achieved a transformative milestone: the U.S. Food and Drug Administration (FDA) approval of VYKAT™ XR (diazoxide choline extended-release tablets) on March 26, 2025. This approval marks a dramatic shift for the company, moving it from a research and development focus to commercial execution. VYKAT XR is the first and only approved treatment specifically indicated for hyperphagia in adults and pediatric patients four years of age and older with Prader-Willi Syndrome (PWS).

PWS is a complex genetic disorder characterized by a range of symptoms, but perhaps the most debilitating is hyperphagia – an insatiable, relentless urge to eat. This symptom typically emerges in early childhood and leads to severe obesity, behavioral problems, and a significantly reduced quality of life for both patients and their caregivers. The burden on families is immense, often exceeding that experienced by caregivers of patients with Alzheimer's. Historically, management has been limited to strict food restriction and environmental controls, highlighting the profound unmet medical need that VYKAT XR aims to address.

Soleno's journey to this point is rooted in its 2017 merger with Essentialis, which brought the diazoxide choline asset into the pipeline. Since then, the company has dedicated substantial resources to developing this compound, culminating in the successful Study C602, which demonstrated positive top-line data from its randomized withdrawal period in September 2023. This clinical validation formed the basis for the NDA submission and subsequent priority review and approval.

VYKAT XR: A Differentiated Therapeutic Profile

VYKAT XR's core technology lies in its extended-release formulation of diazoxide choline. While the precise mechanism of action in PWS is not fully elucidated, its clinical benefits are clear and represent a significant advancement over the previous standard of care (or lack thereof). The key quantifiable benefits and differentiators highlighted by the company include:

• First-in-Class Approval: As the first FDA-approved therapy for hyperphagia in PWS, VYKAT XR establishes a new treatment paradigm.
• Favorable Label: The approved label is notable for its lack of a boxed warning, no contraindication for diabetes, no exclusion based on hyperphagia severity, and no requirement for a Risk Evaluation and Mitigation Strategy (REMS) program. This favorable safety and tolerability profile, supported by clinical data showing significant improvements in hyperphagia and behavioral symptoms, is a crucial competitive advantage, potentially easing physician prescribing and patient access compared to therapies with more restrictive profiles.
• Convenient Dosing: VYKAT XR is administered orally once daily, a significant convenience factor for patients and caregivers compared to multi-dose or alternative administration routes. Dosing is weight-based with a six-week titration period.

These tangible benefits directly address the challenges faced by the PWS community and position VYKAT XR as a compelling treatment option. The favorable label and convenient dosing are expected to support broader adoption among the estimated 10,000 on-label PWS patients in the U.S.

Competitive Landscape: Early Mover Advantage

The competitive landscape for treating hyperphagia in PWS is currently limited, affording Soleno a significant early-mover advantage. While other companies are developing therapies for PWS symptoms, none have an approved product for hyperphagia.

The most notable late-stage competitor is Acadia (ACAD), developing carbetocin. However, as highlighted by management, Acadia's product is a three-times-daily nasal spray that requires temperature control, faced a Complete Response Letter (CRL) from the FDA, and is currently undergoing another study. In contrast, VYKAT XR's once-daily oral formulation and approved status provide a clear advantage in terms of convenience and regulatory certainty. Another potential competitor, Arbor, is reportedly starting a Phase 3 study, but public data remains early-stage. The emergence of GLP-1 receptor agonists and other therapies for PWS symptoms is also noted, but VYKAT XR's specific indication for hyperphagia and its established clinical profile provide a strong initial position.

Soleno's strategy leverages its first-to-market status and VYKAT XR's differentiated profile to establish the drug as the standard of care. The company has built a targeted sales and marketing organization and launched patient support services (Soleno One) to drive awareness, facilitate access, and support patients and healthcare providers. This operational build-out, reflected in the significant increase in selling, general, and administrative expenses in Q1 2025, is critical to capitalizing on the market opportunity ahead of potential future competition.

Early Launch Momentum and Financial Position

The initial weeks of the VYKAT XR launch in the U.S. have shown promising early indicators. As of May 6, 2025, just 29 business days post-approval, Soleno had received 268 patient start forms and prescriptions from 131 unique prescribers. This broad base of early adoption, extending beyond just key opinion leaders to community physicians, is encouraging and suggests strong awareness and willingness to prescribe.

Financially, Soleno reported a net loss of $43.8 million for the three months ended March 31, 2025, an increase from $21.4 million in the same period of 2024. This widening loss is primarily attributable to the significant ramp-up in selling, general, and administrative expenses ($29.3 million in Q1 2025 vs. $8.5 million in Q1 2024) as the company invested heavily in its commercial infrastructure ahead of launch. Research and development expenses decreased slightly ($13.5 million vs. $14.6 million), reflecting the completion of core NDA-supporting activities, though personnel costs within R&D increased. The change in the fair value of the contingent consideration liability also contributed to the increased operating expenses, reflecting the higher probability of achieving commercial milestones post-approval.

Despite the increased operating burn ($32.8 million cash used in operations in Q1 2025), Soleno maintains a robust liquidity position. As of March 31, 2025, the company held $290 million in cash, cash equivalents, and marketable securities.

This is supplemented by a loan agreement with Oxford, under which $50 million is currently outstanding, but an additional $50 million became available upon FDA approval (through September 30, 2025), and a further $25 million will become available later (October 1, 2025 - September 30, 2026), with potential for additional tranches.

Management has stated their belief that existing funds are sufficient to reach cash flow breakeven, a critical outlook for investors assessing the need for future dilution.

Outlook and Strategic Priorities

Soleno anticipates recording its first product revenue in the second quarter of 2025, following the commencement of commercial sales in April. Management expects revenues to start up modestly, a realistic outlook given the typical complexities of a rare disease launch. Factors influencing the initial revenue trajectory include the time it takes for patient start forms to convert to paid prescriptions through specialty pharmacies, the need for patients to schedule physician visits for dosing adjustments, and the timeline for payers to establish and implement formal coverage policies, which can take several months.

Beyond the U.S. launch, a key strategic priority is international expansion. Soleno plans to submit a Marketing Authorization Application (MAA) to the European Medicines Agency (EMA) in the first half of 2025. Europe represents a significant market opportunity, with an estimated 9,500 PWS patients in the EU4 and UK alone, facing the same high unmet need for hyperphagia treatment. The company is currently evaluating whether to commercialize in Europe independently or through partnerships.

The company will continue to invest in selling, general, and administrative activities to support the U.S. launch and prepare for international expansion, which will likely lead to continued increases in these expense categories.

Risks and Challenges

While the approval and launch of VYKAT XR are significant achievements, Soleno faces several key risks inherent in transitioning to a commercial-stage biopharmaceutical company.

• Commercial Execution Risk: As a company with no prior commercialization history, successful execution of sales, marketing, and distribution for VYKAT XR is paramount and not guaranteed. Market acceptance by physicians, patients, and particularly payers will be critical.
• Payer Coverage and Reimbursement: Obtaining broad and favorable payer coverage and adequate reimbursement is essential for commercial success. The timeline for payers to establish policies is variable and could impact the pace of revenue growth. The evolving landscape of healthcare reform and drug pricing pressures (including potential impacts from the IRA) could also adversely affect profitability.
• Competition: While currently first-in-class, VYKAT XR may face competition from other therapies in development for PWS symptoms. The success of these potential competitors could impact VYKAT XR's market share over time.
• Manufacturing and Supply Chain: Reliance on third parties for manufacturing and distribution introduces risks of supply interruptions or issues with specialty pharmacy performance.
• International Regulatory and Commercialization Risk: Pursuing approval and launch in Europe and other territories involves navigating different regulatory pathways, market dynamics, and potential pricing challenges.
• Financial Sustainability: Although management believes current funds are sufficient through cash flow breakeven, this depends on the success and trajectory of the VYKAT XR launch. Failure to generate sufficient revenue could necessitate raising additional capital on potentially unfavorable terms.
• Internal Controls: The previously identified material weakness in internal control over financial reporting related to ITGCs requires effective remediation to ensure accurate financial reporting and compliance.

Conclusion

Soleno Therapeutics has embarked on a transformative journey with the FDA approval and U.S. launch of VYKAT XR, offering the first approved treatment for the devastating hyperphagia associated with Prader-Willi Syndrome. The company's lead product possesses a differentiated profile that addresses a significant unmet need and provides a competitive advantage in a landscape with limited approved therapies. Early launch indicators are encouraging, suggesting initial physician and patient interest.

Backed by a solid balance sheet and access to additional funding, Soleno appears financially positioned to support its commercialization efforts through cash flow breakeven, assuming a successful launch trajectory. The planned EMA submission signals the next phase of growth, targeting a substantial international market. While risks related to commercial execution, market access, and competition remain, the potential for VYKAT XR to become the standard of care for hyperphagia in PWS represents a compelling investment thesis. Investors should closely monitor the pace of patient conversion, the development of payer policies, and progress on international regulatory filings as key indicators of the company's ability to capitalize on this significant market opportunity.