Keep The Hunger On: Analyst Says Soleno Therapeutics' Upside Potential Much Higher Than Downside Risk

Cantor Fitzgerald has initiated coverage on Soleno Therapeutics Inc SLNO with an Overweight rating and a price target of $19. 

Soleno's lead program, diazoxide choline controlled-release (DCCR), is currently in Phase 3 development for Prader-Willi Syndrome (PWS), and the analyst expects the 3Q23 findings to be positive. 

PWS is characterized by insatiable hunger resulting in physical, mental, and behavioral problems.

The analyst notes that the company announced disappointing Phase 3 trial data and missed its primary endpoint on hyperphagia (excessive overeating) three years ago. It says that COVID-19 affected the trial due to impacts on patient routines. 

Statistical significance was reached for the 69% of study subjects who had completed follow-up by March 1, 2020, but top-line results after the pandemic set in did not reach statistical significance. 

Cantor analyst says that secondary endpoints and longer-term data cement DCCR's potential.

The analyst says it is encouraged to see that the changes correlate well with some behavioral manifestations observed with the condition. The company also reported physical changes over a year, which are critical, as excess weight could cause a significant health impact, Cantor writes. 

Considering that the valuation doesn't reflect potential in the PWS market, with no approved therapies, the Cantor analyst sees the upside potential as much higher than any downside risk heading into near-term binary events.

Price Action: SLNO shares are down 0.62% at $4.80 on the last check Tuesday.