The shortseller alleged several risks associated with Vykat XR, including high risk of pre-diabetes/diabetes, pulmonary edema, and congestive heart failure.
Shares of Soleno Therapeutics (SLNO) slumped 7% on Friday afternoon after Scorpion Capital revealed a short position on the stock, citing risks associated with the company’s drug approved for Prader-Willi syndrome.
The shortseller alleged several risks associated with Vykat XR, including high risk of pre-diabetes/diabetes, pulmonary edema, and congestive heart failure. It further alleged that the drug may be at risk of being withdrawn from the market, or new prescriptions may plunge.
On Stocktwits, retail sentiment around Soleno trended in the ‘bullish’ territory over the past 24 hours, while message volume remained at ‘high’ levels.
A Stocktwits user dismissed the short seller report, citing inconsistencies with public data.
Another believes the stock is a good buy-the-dip candidate.
Scorpion Capital said in its report that Soleno is reminiscent of the company Zafgen, which announced two patient deaths in 2015 during a trial with an investigational Prader-Willi syndrome drug, leading to discontinuation of the program. Zafgen subsequently merged with Larimar Therapeutics in 2020.
“SLNO is at high risk of fading back into obscurity as a zombie biotech that trades near cash – $9/share – round-tripping back to single-digit or penny stock status, as it was a mere ~2.5 years ago when it hit 90 cents,” Scorpion Capital said in its report. The firm further alleged that Soleno has “no meaningful assets, pipeline or scientific program, and its only drug is an inferior tablet
version of a half-century-old suspension.”
Scorpion Capital also stated that it intends to shortly submit an emergency Citizen Petition asking the FDA to request Soleno to conduct a voluntary recall of VYKAT XR from the market.
Soleno received the U.S. Food and Drug Administration’s approval for Vykat XR extended-release tablets for the treatment of hyperphagia in patients four years of age and older with Prader-Willi syndrome in March and subsequently launched it in April. VYKAT XR is the company’s first commercial product.
Prader-Willi syndrome is a rare genetic neurodevelopmental disorder caused by an abnormality in the gene expression on chromosome 15, estimated to occur in one in every 15,000 live births. The disorder is defined by hyperphagia, an intense, persistent sensation of hunger, which could be life-threatening.
Scorpion Capital has previously revealed short positions in multiple pharmaceutical and biotechnology companies, including Transmedics Group Inc (TMDX), Harmony Biosciences (HRMY), Twist Bioscience (TWST), and more.
SLNO stock is up by 60% this year and by about 42% over the past 12 months.
Read also: Cleveland-Cliffs Enters Multi-Year Steel Deals With Automakers, Says Report
For updates and corrections, email newsroom[at]stocktwits[dot]com.<