Executive Summary / Key Takeaways

• Soleno Therapeutics has achieved a significant transformation, moving from a clinical-stage company to profitability in Q3 2025, driven by the successful U.S. launch of VYKAT XR, the first FDA-approved treatment for hyperphagia in Prader-Willi Syndrome (PWS).
• VYKAT XR offers a differentiated therapeutic approach with a favorable safety profile and convenient once-daily oral dosing, addressing a substantial unmet medical need in an estimated 10,000 addressable U.S. patients.
• Strong commercial execution is evident in rapidly growing patient start forms, unique prescribers, and broad payer coverage, though the company acknowledges a temporary disruption from a short-seller report and seasonality.
• Soleno maintains a robust financial position with over $556 million in cash and marketable securities, providing ample liquidity for continued U.S. commercialization and strategic European expansion efforts.
• While competition exists, VYKAT XR's unique mechanism and favorable label position it strongly, with future growth catalysts including potential European approval and long-term portfolio diversification.

A New Era for Prader-Willi Syndrome Treatment

Soleno Therapeutics, Inc. (NASDAQ:SLNO) stands at a pivotal juncture, having transitioned from a long-standing clinical development focus to a commercial-stage biopharmaceutical company. This transformation is anchored by the U.S. Food and Drug Administration (FDA) approval of VYKAT XR (diazoxide choline extended-release tablets) on March 26, 2025, marking it as the first approved medicine for treating hyperphagia in adults and pediatric patients aged four years and older with Prader-Willi Syndrome (PWS). This approval addresses a profound unmet medical need for individuals suffering from PWS, a rare genetic disorder characterized by an insatiable desire to eat, known as hyperphagia.

PWS, with an estimated global incidence of 300,000 to 400,000 individuals and approximately 12,000 diagnosed individuals in the United States, presents a complex array of challenges. Hyperphagia, typically manifesting around age seven or eight, leads to significant behavioral problems and imposes a caregiver burden comparable to, or even exceeding, that experienced by caregivers for Alzheimer's patients. Beyond hyperphagia, PWS patients face serious comorbidities, including a greater than 20-fold increase in heart failure, a tenfold increase in venous thrombosis, and a fivefold increase in atrial fibrillation and pulmonary embolism, contributing to a mortality rate substantially higher than the general U.S. population. Soleno's journey, which began with its incorporation in 1999 and a strategic merger with Essentialis in 2017, has culminated in bringing this critical therapy to market.

VYKAT XR: A Differentiated Therapeutic Approach

VYKAT XR represents a significant technological advancement in PWS treatment. Its core technology, diazoxide choline extended-release tablets, offers a once-daily oral administration, a tangible benefit for patient convenience and compliance. The therapy involves a weight-based dosing regimen with an approximate six-week titration period, allowing for personalized treatment optimization.

A key differentiator for VYKAT XR is its favorable safety and tolerability profile, which is reflected in its FDA-approved label. The label notably contains no box warning, no contraindication for diabetes, no exclusion for severity of hyperphagia, and no requirement for a Risk Evaluation and Mitigation Strategy (REMS) program. Post-launch, the incidence of fluid retention-related adverse events has been observed to be lower than what was seen in clinical trials, even among a more complex patient population with more comorbidities. The most common adverse events reported in clinical trials were hypertrichosis, edema, hyperglycemia, and rash, most of which were self-limiting and manageable with dose adjustments or concomitant treatment.

For investors, these technological attributes translate into a robust competitive moat. The ease of administration, coupled with a benign safety profile, enhances VYKAT XR's market positioning and potential for broad adoption. The long-term open-label study data, which includes patients with nearly six years of continuous treatment, provides substantial evidence of efficacy and safety, fostering confidence among prescribers and patients. Furthermore, Soleno's ongoing R&D initiatives, such as exploring machine learning to identify PWS patients for optimized sales targeting, underscore a commitment to leveraging technology for sustained market penetration and growth. This technological differentiation is crucial for establishing VYKAT XR as the standard of care and driving long-term revenue generation.

Commercial Momentum and Market Penetration

The U.S. commercial launch of VYKAT XR has demonstrated remarkable momentum since its availability on April 14, 2025. In the second quarter of 2025, Soleno reported $32.7 million in net revenue, with 646 patient start forms and 295 unique prescribers. Building on this strong foundation, the third quarter of 2025 saw net revenue more than double to $66.0 million, bringing cumulative patient start forms to 1,043 and unique prescribers to 494 by September 30, 2025. This rapid uptake reflects the urgent unmet need for an FDA-approved therapy for hyperphagia in PWS.

Soleno's commercial strategy, led by its Chief Commercial Officer Meredith Manning, has focused on disciplined execution, effectively introducing VYKAT XR to the prescriber community, patients, caregivers, and payers. The company has achieved broad payer coverage, encompassing approximately 132 million lives by the end of Q3 2025, including policies from the top three national PBMs and reimbursed claims from about 40 state Medicaid programs. This broad access is a testament to payers recognizing the seriousness of PWS and the meaningful value VYKAT XR delivers. The average time to fill prescriptions is targeted at approximately 30 days, a key operational metric for patient access.

Despite this strong trajectory, the company experienced a disruption in its launch in mid-August 2025, following a short-seller report. This led to a temporary decrease in patient start forms and an increase in discontinuations for non-serious adverse events. Management noted that October trends resembled September, indicating a period of stabilization after the initial bolus of demand. Soleno is actively addressing this by dedicating significant resources to educating physicians and families, leveraging patient and community educators (PACE team), and hosting live community events to share real-world experiences with VYKAT XR. The company believes these efforts will help mitigate the impact of misinformation and reinforce VYKAT XR's position as a standard of care.

Financial Performance: From Clinical Stage to Profitability

Soleno Therapeutics has achieved a significant financial milestone, transitioning from a history of substantial losses to operating profitability in the third quarter of 2025. For the three months ended September 30, 2025, the company reported net income of $26.0 million, a stark contrast to the net loss of $76.6 million in the same period of 2024. This profitability was driven by product revenue, net, of $66.0 million, generated entirely from the sales of VYKAT XR following its FDA approval in March 2025. For the nine months ended September 30, 2025, product revenue reached $98.7 million, contributing to a net income of $22.5 million, compared to a net loss of $119.9 million in the prior year period.

Cost of goods sold for Q3 2025 was $1.1 million. This figure is notably low as a percentage of revenue because costs associated with manufacturing VYKAT XR were expensed as research and development prior to FDA approval. As the company depletes this "zero-cost" inventory and replenishes it with at-cost inventory, the cost of goods sold as a percentage of revenue is expected to increase. Research and development expenses decreased to $8.4 million in Q3 2025 from $30.1 million in Q3 2024, primarily due to the completion of NDA submission activities and reduced clinical and supply chain costs, though an additional $1 million was incurred for the European MAA submission during the nine-month period. Selling, general and administrative (SG&A) expenses, while showing an overall decrease due to lower non-cash stock-based compensation compared to the prior year, saw an increase in cash expenses reflecting significant investment in additional personnel and new programs to support the VYKAT XR commercial launch.

Soleno's liquidity position is robust. As of September 30, 2025, the company held $246.7 million in cash and cash equivalents and $309.4 million in marketable securities, totaling $556.1 million. This strong balance sheet was significantly bolstered by a July 2025 public offering that raised $230 million in gross proceeds. The company also has access to additional tranches of its loan and security agreement with Oxford, with $25 million available through September 30, 2026, and further tranches contingent on commercial milestones and mutual consent. Management explicitly stated that current cash, cash equivalents, marketable securities, and cash flows from operations are expected to be sufficient to meet obligations for at least the next twelve months. This financial strength provides the necessary capital to execute the U.S. launch effectively and pursue international expansion.

Competitive Landscape and Strategic Positioning

Soleno Therapeutics operates within the competitive rare disease biopharmaceutical market, where its lead product, VYKAT XR, targets the niche of Prader-Willi Syndrome. While VYKAT XR holds the advantage of being the first FDA-approved therapy for hyperphagia in PWS, the landscape includes both direct and indirect competitors. Direct competitors are other companies developing therapies for PWS, such as Acadia (ACAD) (with carbetocin) and Arbor (with a Phase 3 candidate), as well as broader rare disease players like Harmony Biosciences Holdings, Inc. (HRMY), Ultragenyx Pharmaceutical Inc. (RARE), Ionis Pharmaceuticals, Inc. (IONS), and PTC Therapeutics, Inc. (PTCT).

VYKAT XR's competitive edge stems from its oral, once-daily formulation and favorable safety profile, which could offer greater patient accessibility and compliance compared to potential rivals like Acadia's carbetocin, a three-times-a-day nasal product requiring temperature control. While companies like RARE and IONS possess advanced technological platforms (e.g., gene therapies, RNA-targeted therapies), VYKAT XR's straightforward mechanism and established clinical data provide a distinct advantage in its specific indication. Soleno's focused R&D approach for PWS allows for agility in addressing this specialized market, contrasting with the broader portfolios of larger competitors.

Financially, Soleno's recent achievement of profitability and strong cash position marks a significant shift, though it is still in the early stages of commercialization compared to more established rare disease companies. Its gross profit margin of 98.14% (TTM) is indicative of the high-value nature of rare disease drugs. However, operating and net profit margins are still negative on a TTM basis, reflecting the substantial investments in R&D and SG&A required for launch and market development. Soleno's strategic positioning aims to leverage its first-to-market status and strong patient/physician education to capture market share, while continuously evaluating the evolving competitive pipeline.

Outlook and Growth Catalysts

Soleno Therapeutics anticipates sustained growth for VYKAT XR, moving beyond the initial "bolus" of patient starts to a "slow, steady buildup over time" that will establish a solid revenue base. Management expects selling, general and administrative expenses to continue increasing as commercialization efforts intensify, with cash operating expenses projected to be between $120 million and $130 million for 2025, potentially rising to $140 million to support early European initiatives and life cycle management. For 2026, cash OpEx is expected to "go north of $150 million," with the exact figure dependent on the European commercial footprint.

A significant growth catalyst is the potential approval of VYKAT XR in Europe. Soleno submitted its Marketing Authorization Application (MAA) to the European Medicines Agency (EMA) in May 2025, which has since been validated. The company is currently preparing responses to day 120 questions from the EMA, which are similar in nature to those encountered during the FDA approval process. The European market for PWS is substantial, with an estimated 9,500 patients in France, Germany, Italy, Spain, and the U.K. combined, and patient care often concentrated in centers of excellence, potentially allowing for an efficient commercialization strategy. While the company is assessing both partnering and self-commercialization options for Europe, its strong balance sheet provides the flexibility to pursue either path. In the long term, Soleno plans to diversify its portfolio by seeking opportunities "likely adjacent" to its current focus, though this is not an immediate priority.

Key Risks and Challenges

Despite the promising launch, Soleno Therapeutics faces several inherent risks. The company's immediate success is heavily dependent on VYKAT XR, its sole FDA-approved product. Any failure to achieve sustained market acceptance by physicians, patients, caregivers, and payers could materially harm its business. While the safety profile has been favorable, VYKAT XR may still cause adverse side effects that could limit its commercial desirability or lead to negative consequences post-commercialization, potentially impacting discontinuation rates.

Operational risks include reliance on sole-source suppliers for raw materials and manufacturing, where interruptions could disrupt supply and harm the business. The company is also subject to evolving U.S. and foreign privacy, data protection, and data security laws, with non-compliance potentially leading to substantial costs and liabilities. Furthermore, Soleno has identified a material weakness in its internal control over financial reporting related to information technology general controls (ITGCs), which it is actively remediating. The company has also been subject to short-selling campaigns, which can cause stock price volatility and divert management attention. Broader industry trends, such as healthcare reform measures like the Inflation Reduction Act (IRA) and the One Big Beautiful Bill Act (OBBBA), could impact drug pricing and reimbursement, potentially affecting VYKAT XR's commercial success.

Conclusion

Soleno Therapeutics has successfully navigated a critical transition, establishing VYKAT XR as a groundbreaking therapy for Prader-Willi Syndrome and achieving profitability in Q3 2025. The company's focused strategy, underpinned by a differentiated product and robust commercial execution, has driven rapid patient uptake and broad payer coverage in the U.S. While challenges such as competitive pressures, potential launch disruptions, and operational risks persist, Soleno's strong financial position and clear roadmap for European expansion provide a compelling outlook. Investors should monitor the continued trajectory of VYKAT XR's commercialization, the progress of its European Marketing Authorization Application, and the company's strategic responses to the evolving competitive and regulatory landscape, as these factors will be instrumental in realizing Soleno's long-term growth potential.