Soleno Therapeutics, Inc. (NASDAQ: SLNO) is focused on the development and commercialization of novel therapeutics for the treatment of rare diseases. The company’s lead candidate, DCCR, a once-daily oral tablet for the treatment of PWS, is currently being evaluated in a Phase III clinical development program.

The share price of SLNO experienced a massive (+98%) surge with strong volumes on 15^th March 2019 after it announced that the Data Safety Monitoring Board (DSMB) had recommended the continuation of the Company’s Phase III trial in Prader-Willi Syndrome (PWS) patients, DESTINY PWS, without any changes.

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The Phase III DESTINY PWS trial is a randomized, double-blind, placebo-controlled study of once daily oral administration of DCCR versus placebo in approximately 100 patients with a confirmed diagnosis of PWS. The primary endpoint changes from baseline hyperphagia score at Week 13. Patients who complete DESTINY PWS have the option to enroll in C602.

The analysts tracking the stock are incredibly bullish about the ongoing developments, comfortable financial profile of the company, improving traction in its market-leading product candidate and anticipation of the upcoming presentations reinforcing the long-term value of the company.

Management commentary:

“We are delighted with the DSMB’s positive recommendation to continue the Phase III trial as planned as it further supports DCCR’s safety profile,” said Dr. Anish Bhatnagar, Chief Executive Officer of Soleno. “We are continuing to enroll patients with 14 sites activated in DESTINY PWS. In addition, patients continue to roll over into C602, the 9-month open-label safety extension study for patients completing blinded treatment in the DESTINY PWS study.”

Successful financing:

• On December 19^th, the company announced that it has entered into a definitive agreement with certain institutional and accredited investors to raise aggregate gross proceeds of approximately $16.5 million through the private placement of its equity securities 
• Soleno intends to use the net proceeds from the offering to support the ongoing DESTINY Phase III program (“DESTINY PWS”) of Diazoxide Choline Controlled-Release (“DCCR”) in Prader-Willi syndrome (“PWS”), a rare and complex genetic neurobehavioral/metabolic disorder affecting appetite, growth, metabolism, cognitive function, and behavior, as well as general corporate purposes. 
• Upcoming presentation:

Analysts’ Views:

• These accomplishments and other activities have contributed to the company’ strong business risk profile, and the market is highly excited with the developments. Moreover, the progress of the company justifies a relatively higher intrinsic value beyond what is being currently reflected in the price.
• As per marketbeat.com, their average twelve-month price target is $7.6667, suggesting that the stock has a possible upside of 186.07%. The high price target for SLNO is $14.00, and the low-price target for SLNO is $4.00. There are currently 3 buy ratings for the stock, resulting in a consensus rating of “Buy.”

Other Recent Highlights

• Continued enrolment for Phase III DESTINY PWS clinical trial of DCCR
  • 10 activated U.S. trial sites. Additional sites are being activated and resources being deployed to support timely completion of the trial
  • Safety consistent with the known profile of DCCR and no serious unexpected adverse reactions to date
  • C602, the 9-month open-label safety extension study, has commenced for patients completing three months of treatment in the DESTINY PWS study
• Protocol amendment to DESTINY PWS trial submitted to and accepted by the U.S. Food and Drug Administration (FDA)
  • Amended protocol reduces the age of inclusion to four years of age, from eight years of age previously
  • Allows inclusion of PWS patients who develop symptoms of hyperphagia, the central characteristic of PWS by age 4, with nearly all patients exhibiting hyperphagia by age 8
• Granted Fast Track designation by the FDA for DCCR for the treatment of PWS 
• Presented clinical data on DCCR at Late Breaking Session of European Society of Paediatric Endocrinology
  • Pharmacokinetic data presented clearly demonstrated that DCCR is suitable for once-daily dosing, which is important for patient compliance, particularly in children
  • Placebo-controlled data indicated that DCCR’s intraday circulating drug levels have the potential to reduce the likelihood of adverse events that can be associated with drug level fluctuations
• Presented clinical data on DCCR at 2018 Foundation for Prader-Willi Research Annual Conference (FPWR)
  • Data presented indicate that DCCR targets the underlying neural mechanisms of hyperphagia in PWS
  • Safety data presented showed that DCCR’s once-daily dosing demonstrates the potential for improved safety and provides justification for the current dosing regimen
• Issued U.S. patent (No. 10/058,557) related to the use of pharmaceutical formulations of diazoxide and diazoxide choline to increase lean body mass and the lean body mass/fat mass ratio in patients with PWS

Third Quarter 2018 Financial Highlights/achievements:

• Research and development expense was $2.1 million for the three months ended September 30, 2018, compared to $1.0 million in the same period of 2017.  The increase was primarily due to spending related to the Phase III trial of DCCR in PWS.
• The net loss for the third quarter of 2018 was $2.7 million, or ($0.13) per share, compared to a net loss of $3.8 million, or ($0.39) per share, for the third quarter of 2017
• As of September 30, 2018, Soleno had cash and cash equivalents of approximately $10.2 million, compared to $17.1 million at December 31, 2017.

Key risk factors and potential stock drivers:

• Successful commercialization of company’ key product would lead future direction for the company. Any adversities related to this might adversely impact the overall investor sentiments.
• SLNO is still an early stage entity and will likely operate at a loss as it grows its market position and seeks ways to monetize it. 
• The company might need to offer new securities, which would have the potential dilution risk for the existing shareholders.
• SLNO has a history of operating losses. Therefore, any time or cost overrun in its ongoing R&D activities and its impact on business & financial profile will remain a key business sensitivity factor. 
• The company’ business risk profile is subject to regulatory risk.
• The pharmaceutical industry is highly competitive and characterized by a number of established, large pharmaceutical companies, as well as specialty pharmaceutical companies that market pain, neurology, psychiatry, primary care, and other products.
• Some of the established competitors may have a competitive advantage over SLNO due to their size and financial resources.

Stock Performance

Comments:

• On Friday, March 15th, 2019, SLNO closed at $2.68 (up by 98.52%), with a substantial volume of 78.7 million shares exchanging hands. Market capitalization is $85.104 million. The current RSI is trending at 77.64
• In the past 52 weeks, shares of SLNO have traded as low as $1.11 and as high as $5.07
• At $2.68, shares of SLNO are trading above its 50-day moving average (MA) at $1.68 and above its 200-day moving average (MA) at $2.06
• The present support and resistance levels for the stock are at $0.85 & $4.33 respectively.

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