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Investing.com -- Soleno Therapeutics Inc (NASDAQ:SLNO) stock fell 13% Friday morning following a short report from Scorpion Capital that raised serious concerns about the company’s recently approved Prader-Willi syndrome treatment, VYKAT XR.
The short seller’s report highlighted potential safety issues, claiming there has been a "rapid pile-up of reports of children hospitalized for potential heart failure in recent weeks" shortly after starting treatment with VYKAT XR. Scorpion Capital suggested the drug may be at risk of being withdrawn from the market or facing a significant decline in new prescriptions.
Scorpion compared Soleno to Zafgen, a previous Prader-Willi focused company that "went extinct after two fatalities during its trial circa 2015," while suggesting Soleno’s situation "appears to be unfolding at a more devastating pace."
The report also questioned Soleno’s business fundamentals, describing it as a "one-trick pony with no meaningful assets, pipeline or scientific program." Scorpion noted that VYKAT XR is "an inferior tablet version of a half-century-old suspension" with core patent expiration in 2026.
Additionally, the short seller raised concerns about Soleno’s launch metrics and alleged data integrity issues in key papers co-authored by a physician who served as lead investigator in the company’s trials. Scorpion predicted the stock could return to single-digit or penny stock status, where it traded approximately 2.5 years ago.
Soleno Therapeutics received FDA approval for VYKAT XR in October 2023 for the treatment of hyperphagia and weight management in Prader-Willi syndrome. It hasn’t responded yet to the allegations.