Soleno Therapeutics, Inc.

Greetings and welcome to the Solano Second Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may press star one at any time to be placed into the question queue, and we ask that you please ask one question and one follow-up, then return to the queue. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Brian Ritchie of LifeSci Advisors. Please go ahead, Brian.

Thank you. Good afternoon, everyone, and thank you for joining us to discuss Celano Therapeutics' second quarter 2025 financial and operating results. Please note, we'll be making certain forward-looking statements today. We refer you to Celano's SEC filings for a discussion of the risks that may cause actual results to differ from the forward-looking statements. On the call with me today for Celeno are Anish Bhatnagar, Celeno's Chairman and Chief Executive Officer, Meredith Manning, Celeno's Chief Commercial Officer, and Jim McInnes, Celeno's Chief Financial Officer. With that, I will now turn the call over to Anish.

Thank you, Brian. and thank you everyone for joining us for our second quarter financial results call. For those who follow us closely, you will know that we announced results for the second quarter ending June 30th, 2025 on July 10th. Therefore, many of you will be familiar with certain key metrics we'll be discussing today. With that said, I am very pleased to share our significant progress during the second quarter, highlighted by the commercial launch of VCAT XR, and commencement of treating people living with Prader-Willi syndrome, or PWS. Meredith will review the company's commercialization progress to date, and Jim will cover the company's financial statements for the second quarter. We will then open the call for questions. We achieved a major milestone for the PWS community and for Celeno in March when we launched ViCAD XR, the first FDA-approved medicine for the treatment of hyperphagia in adults and children four years of age and older with PWS. The approval of VICAD XR was based on our comprehensive clinical development program in which participants received double-blind and or open-label VICAD XR for a mean duration of 3.3 years. Primary evidence of efficacy came from a 16-week randomized withdrawal phase three multicenter double-blind placebo-controlled trial. Following FDA approval on March 26th, Vicat XR was available on April 14th, ahead of plan. We've been extremely pleased with the initial reception and demand from the PWS community, which we believe speaks to the urgent need for an FDA-approved therapy to treat the hallmark feature of PWS, which is hyperphagia. As we announced at that time, concurrent with product availability, prescriptions of Vicat XR had been delivered to the first individuals living with PWS. Since that time, we have seen steady growth in both patient starts and unique prescribers. Total net revenue was $32.7 million in the second quarter, which in part reflects underlying demand for the drug, but also the significant efforts of our experienced commercial team, whose launch outreach efforts to patients, physicians, and payers set the stage for a strong and successful launch. As Meredith will describe in a moment, We have made steady progress with both commercial and government payers. We continue to engage with payers to ensure that they understand the severe complications and high unmet need associated with PWS and the inherent value proposition that VICAD XR offers. Establishing broad payer reimbursement is among our highest priorities going forward, and the compelling efficacy and safety data from our clinical trial program is clearly resonating. I would like to once again recognize the substantial contributions of the entire PWS community, including study participants and their families, the study investigators and study site team members, as well as the two major PWS advocacy organizations, the Foundation for Prader-Willi Research and the Prader-Willi Syndrome Association USA. I would also like to thank the Soleno team members who worked so tirelessly to get us to this point. I would now like to provide a brief update on our activities in support of potential approval of DCCR in Europe. As you know, we market DCCR in the U.S. as Vicat XR. PWS is a global disease that impacts hundreds of thousands of patients all over the world. In an effort to make DCCR available to as many of these patients as possible, in parallel with our U.S. commercial launch, we have continued to make progress along regulatory pathways and other geographies. the most important of which is the EU. As we have stated previously, Europe also has a high unmet need among patients with PWS. Based on widely cited prevalence data, it is estimated that approximately 9,000 patients living with PWS in the EU4 and the UK. We have conducted market research with many PWS experts, patient advocacy leaders, care home executives, et cetera, where we have confirmed the prevalence numbers. Today, in most major markets in the EU, early diagnosis is common. Our research suggests that there is significant structured care for people living with PWS across Europe, with variations that will impact our go-to-market strategy by country. Additionally, as with the U.S., the PWS community has strong thought leader support, and patient care is often concentrated around centers of excellence, even more so than in the U.S. In May, we were pleased to announce the submission and EMA validation of our marketing authorization application. Gaining approval to market DCCR in the EU would represent a meaningful expansion of our commercial market and remains a priority for us while we continue to progress our U.S. launch. I will now turn the call over to Meredith to provide an update on the launch.

Thank you, Anish, and good afternoon, everyone. As Anish previously mentioned, we are still in our early phase of launch, and the response from both families and providers has been exceptionally encouraging. This tells us that our outreach, whether to caregivers, individuals with PWS, physicians, centers of excellence, payers, or advocacy groups, is truly resonating. Our disciplined execution and strong, clear messaging are helping us to build clinical conviction in the field. Taken together, these factors reinforce our confidence in the significant potential ahead. At this point, I would like to provide an update on the key performance indicators that we believe are helpful in tracking our progress. The first of these is patient start forms. As we announced in our preliminary results press release on July 10th, we received 646 patient start forms from launch through June 30th. A vast majority of people who have started treatment, as expected, are younger, so that's between four and 26 years of age. However, a majority of these individuals are older than what we saw in the clinical trial C601, which was approximately 13.5 years. The second key performance indicator is the number of prescribers. From launch through June 30th, that number is 295 unique prescribers. More than a third of the top 300 prescribers who are the primary prescribers for approximately 2,000 patients have written prescriptions. and we are very heartened to see a large number of start forms coming from prescribers who we did not expect to see writing start forms this early in our launch. We believe the launch momentum and positive results directly reflects the success of our strategic launch efforts, initiatives that targeted pediatric and adult endocrinologists, geneticists, and psychiatrists who directly treat or influence a substantial portion of our addressable market. Our field force is prioritizing deep engagement with top-tier providers, each of whom treats multiple individuals with PWS, not only to further strengthen their experience and confidence with VicatXR, but also because these key clinicians play a pivotal role in influencing practice patterns and the broader adoption of new therapies within the PWS community. At the same time, we are increasingly encouraged by the strong response from physicians beyond this core group. This demonstrates not only growing awareness of VICAT-XR, but also expanding recognition of the therapeutic need to treat hyperphagia. The third performance indicator is payer policies. As Anish mentioned, securing broad coverage for VICAT-XR is a core focus for us and is fundamental to the success of our launch. We have seen rapid and broad coverage surpassing recent rare disease launches, with approximately 33% of all insured lives now covered, representing just over 100 million lives covered in the United States. We are encouraged with the payer coverage policies established for BICAT-XR to date, including several from major insurers. And it's worth highlighting that we are receiving coverage across all channels, commercial, Medicaid, and Medicare. And to see such broad coverage so early in the launch is outstanding. These positive outcomes are a direct result of our proactive engagement, efforts that enabled payers to move quickly in recognizing the value of ICAT-XR and the urgency of addressing PWS-related hyperphagia. The coverage decisions we have seen so far demonstrate that payers recognize the seriousness of PWS, understand the unique challenges of hyperphagia, and appreciate the meaningful value VicatXR delivers. I will now turn the call over to Jim for a review of the company's financial statements for the second quarter.

Thank you, Meredith. We used 12.6 million of cash in operating activities during the three months ended June 30, 2025, and had 293.8 million of cash, cash equivalents, and marketable securities at the end of the quarter. Subsequent to the quarter end, we raised an additional 230 million of gross proceeds through an underwritten offering of our common stock, bringing our total pro forma cash balance following the financing to more than 500 million. This balance sheet strength ensures that we are sufficiently well capitalized to execute on an effective U.S. launch of ICAT-XR and become cash flow positive, while in parallel progressing towards regulatory approvals and commercialization, either on a standalone basis or with partners in the EU and other geographies. Turning now to a few income statement items. Total net revenue for the second quarter ended June 30, 2025, was $32.7 million. As VICAT XR was approved in March of this year, the company generated no revenue in the second quarter ended June 30th, 2024. Cost of goods sold was $0.7 million for the second quarter ended June 30th, 2025. Please note that prior to the FDA approval, costs associated with manufacturing VICAT XR were expensed as research and development expenses. As such, a portion of the cost of goods sold during the period included inventory at zero cost. Going forward, as we continue to sell Vicat XR, we will deplete our zero-cost inventory and replenish it with at-cost inventory, and consequently, cost of goods sold as a percentage of revenue will increase. Research and development expense for the second quarter ended June 30, 2025, was $9.1 million, which includes $2.4 million of non-cash stock-based compensation, compared to $12.3 million which includes $2.7 million of non-cash stock-based compensation for the same period of 2024. The cadence of our research and development expenditures fluctuate depending upon the state of our clinical programs, timing of manufacturing, and other projects as we've moved through submission, approval, and now preparation for commercialization. Selling general administrative expense for the second quarter ended June 30, 2025, was $28.2 million, which includes $7.3 million of non-cash stock-based compensation, compared to $10.9 million, which includes $4.5 million of non-cash stock-based compensation for the same period of 2024. The increase reflects our ongoing investment in additional personnel and new programs to support the VICAT XR commercial launch and in support of our increased business activities. Total other income net was $1.8 million for the three months ended June 30th, 2025, compared to total other net income of $3.0 million in the same period of 2024. Net loss was approximately $4.7 million or $0.09 per basic and diluted shares for the second quarter ended June 30th, 2025, and $21.9 million or $0.57 per basic and diluted share for the same period in 2024. This concludes the financial overview, and I'll now turn the call back over to Anish for closing remarks. Anish?

Thank you, Jim. In closing, while we are still early in the launch of ICAT-XR, we are pleased with the trajectory we're on. In the second quarter, we saw extraordinary momentum in the number of start forms, patients on active drug, number of patients on paid drug, and lives covered. While we're not able to share details at this time since we are far from steady state, we continue to be encouraged that Vicat XR is a groundbreaking therapy, and we believe it will soon be the standard of care for people living with PWS-related hyperphagia. And with that, we'll now open the call to questions. Operator?

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star, followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any key. Your first question comes from Yasmin Rahimi with Piper Sandler. Your line is now open.

Good afternoon, team. Thank you so much for the updates. I guess many of our clients were wondering if you could comment on how do you see sort of the monthly scripts in July compared to the earlier months, and how do you think it will change going into the remainder of August and September? Appreciate any color around that. And then also, maybe one second one to squeeze in is, like, what is sort of the time to fill currently, and how do you think it would change over time? And I'll jump back in the queue.

Okay. Thanks, Yasmeen. I'll take the July question. As you know, we're not addressing data after the end of the quarter on this call. But what I can tell you is that we have confidence that Vicat XR is on its way to being the standard of care for people living with PWS. It is going to be a therapy that's going to be meaningful, and it's going to be something that PWS patients are going to be on for a long time to come. But Meredith, I'll let you address the time to fill question.

Yeah, thank you. Thanks, Yasmin, for the question. I think with regard to time to fill and something that we've mentioned in the past is it takes a while for the payer policies to come in and have a steady state. And while we're very pleased and super encouraged with the 33% coverage live, you know, we still expect policies to come in and for that to grow. So we've seen pretty rapid turnaround time based on the fact that we do have very strong policies, favorable policies coming in, and we have that 33% coverage. As more policies come in, the turnaround time could potentially slow, and then hopefully as we move into the later months, you know, after a full year, we're looking at reaching a steady state, and something that we're shooting for that we've seen in other rare disease or other therapeutic areas, around approximately 30 days of turnaround time is pretty standard.

Thank you so much.

Your next question comes from Rye Forseth with Guggenheim. Your line is now open.

Hi, this is Rye from Debchit's team. Thanks for taking our questions. Are there any emerging pain points during the patient start form process that you see as addressable in the next couple quarters? And our second question is, how are early compliance trends tracking?

So, on the pain points front, as you know, this is a very strong start. I mean, 646 patient starts in the first quarter is a very large number. We try to track things like seasonality, holidays, summer holidays, things like that. And this is the first drug launch for hyperphagia. So we don't know how it's going to be. It's hard for us to predict the pain points with the start forms. But again, the next couple of quarters will be pretty educational, so we'll keep you posted on that. And your second question was? Compliance. Compliance.

Compliance.

Yeah, so it's too early to tell, Rai, because we haven't seen that much data. But what I can tell you is that discontinuation rates are substantially lower than what we saw even in clinical trials. So as you may remember, in our trials, we've seen very high compliance rates, in part because some of the people living with PWS can also have obsessive-compulsive tendencies, and they tend to want to stay on drug as well. So we don't expect that to change significantly and certainly too early to tell from the data.

Thank you very much.

Your next question comes from Kristen Kluska with Kantor. Your line is now open.

Hi, everyone. Congrats on a very strong quarter. My first question, I just wanted to get a sense of what you're seeing on safety. You've obviously collected a lot of real-world evidence now. And then second, I know you're not commenting on specific revenue trends, but clearly I think the 2Q numbers were a lot higher than a lot of us modeled and what the investment community was looking for. So can you just give us any... broad sense of how we should be thinking about the rest of the year so people perhaps don't go over their skis either. Thank you.

Sure. Thanks, Kristen. Thanks for the question. So on the safety side, as many of you I'm sure know, monitoring for safety data in a post-marketing setting is quite different from clinical trial settings. So one typically relies on reports from caregivers or healthcare providers, And the patients that you're treating are also often not as controlled and may have more comorbidities, et cetera. So we are pretty early in the launch. But that said, I can tell you that we have not seen anything in the post-marketing setting that is different from the clinical trial setting. So there are no new safety signals. And once again, just to reiterate, what we have seen with the discontinuation rates at this time are substantially lower than what we have seen in the clinical trials. And Jim, I'll let you take the revenue question.

Sure, yes. Hi, Kristen. Yeah, well, as you know, there are quite a number of moving parts between a start form and ultimately the revenue. So I think what we saw was the fact that everything seemed to be clicking very, very well out of the gate. So that's excellent. We're obviously sort of mindful of maybe things normalizing over the next couple of quarters. But at the moment, it just seems to be a very strong start with everything all coming together. So good momentum out of Q2.

Thank you.

Your next question comes from Tyler Van Buren with TD Catwin. Your line is now open.

Hey, guys. Thanks very much, and congratulations on the tremendous progress made during the quarter. So regarding the 33 million of ICAT sales for the quarter, can you help us understand to what extent there was an initial patient bolus or stocking in this number? And maybe just a follow-up, I think you mentioned that commercially you're seeing older patients in the 13 and a half years in the trial. So does that mean on average that these commercial patients are heavier in weight above that 61 kilograms and higher than the average price of $466,000 estimated based on that?

Thanks, Tyler. Jim, you want to take the bolus stocking question?

Yeah, so specifically to the stocking question, Tyler, yeah, as you know, we have one distribution partner, Panther. They have been managing their business, I'd say, very astutely. They order weekly from us. They obviously do carry a little bit of inventory, probably seven to ten days, but we've not really seen anything that was out of the norm, so they've just been a very repetitive once-a-week stocking proposition from us, and that's continued. So I don't think there's any anomalies there. I think on the bolus question, you know, yeah, we do think there's a fantastic set of start forms coming in in Q2. I think we've commented before, hard to imagine that that will continue linearly going forward, if you like. So there'll be some moderation there. But, you know, everything at the moment seems to indicate a very strong launch going forward.

And Tyler, to your question about patient waits, as you correctly pointed out, The patients that we're seeing, the majority of them are above the average age in 601, which is more than 13 1⁄2 years. So I think it's a reasonable assumption that they are heavier as well.

Thank you.

Your next question comes from James Condulis with People. Your line is now open.

Hey, thanks so much for taking my question, and congrats on the quarter. Just one from us, just curious. you know, these patients and start forms you're seeing obviously a great start. Is this all kind of coming, are these patients on sort of like their normal cadence of visiting doctors or are these kind of patients, you know, calling in and trying to get in kind of off cycle? Just curious if you have any color on that dynamic and kind of on that more broadly, all the kind of cylinders seem to be firing here. So curious what is the rate limiter here kind of going forward if there's any that's obvious to you. Thanks so much. Meredith, go ahead.

Yeah, happy to take that, and it's been really nice to get out in the field and be with our field team and also meet with many of the clinicians. We're seeing both, to answer your question, both patients who were very proactive as they were anticipating the launch of VICAT-XR, getting some of their appointments set up within an early timeframe, But we're also seeing that some of the PWS experts are very busy with the launch, and therefore it is taking time to get some of the other patients coming in. I think something that we're very excited to see is many of these clinics did not have a set PWS clinic day prior to launch. And so as we're seeing the groundwork being laid across these various different clinics, They are setting up their PWS clinic days, and we feel like that that will allow for a little bit more steady patient visits and patient cycle to come in. So we're still seeing good, significant opportunity ahead with the way that the landscape is really measuring out their process and their logistics.

Your next question comes from Leland Gershow with Oppenheimer. Your line is now open.

Hi, good afternoon, guys, and thanks for the update and tremendous progress. I wanted to ask, you know, maybe a little bit in connection with the last question. Patients with PWS come at different levels of severity, like in all diseases. Wondering if you're seeing any pattern where perhaps the more severe patients are the ones who are getting Vicat XRI. earlier as in Q2 and currently, and if we should maybe think about a broader uptake as physicians become more familiar with the drug. I also want to ask with respect to Europe. I know that's probably going to be in next year, but you're sort of touching profitability here on the U.S. business. Wondering if you could just comment on what could be maybe a more efficient launch in Europe with respect to OPEX. and how that may affect your thoughts on profitability and cash flow going forward. Thanks.

Sure. Thanks, Leland. So in terms of severity, we don't actually collect that information actively. What we see is a diagnosis of PWS and presence of hyperphagia as sort of on label and the age of four years, and that patient would be on label. So we don't get that level of detail. But I suspect there's probably a combination of things happening. One is the idea that if there are severe patients, there's probably physicians who are calling them in earlier and getting them on drugs. But there's definitely an element of more motivated families, likely with younger kids, who are also pushing their way to getting therapy earlier. And we think this phenomenon of a lot of the non-KOL prescribers may well be the idea that the KOL practices are so full that some of these more motivated families are going to peripheral providers, their local endos, et cetera, and getting prescriptions from there. In terms of the EU business and OPEX, Jim, you want to take that?

Yeah, sure. So I think, Leland, you said that. I mean, that goes back to the fact that we have the $500 million of balance sheet strength. So it allows us the optionality when we're looking at Europe. We mentioned partners along the way, but we now also have the ability, if we wish, to continue to do it on our own We do think it's a concentrated market. You know, some of the ways that rare diseases are addressed within the European countries do present sort of smaller call points than even in the U.S. So, you know, we've still got to work out the details on exactly the size of the sort of the sales force, the commercial team that would be needed if we do go on our own. But we think it's manageable. And as I said, we just point back to the $500 million because it gives us that option to do it if we choose.

All right. Thank you.

Your next question comes from Brian Scorny with Baird. Your line is now open.

Hey, good afternoon, and thanks for taking my question. And congrats on, in my entire career, being the first company to have a sequentially down operating expenditures into the first quarter of launch. Very impressive. So to that point, Jim, I'm just wondering, looking at the OPEX, if this is a fair go-forward number to model for the U.S. business, and it says that operationally spent $12.5 million in cash. I'm just wondering if I look at just the income statement, did $32.7 million in sales, was about $40 million in OpEx, but if I back out stock-based comp, that's $10 million less. So I would have thought that it would actually be operationally cash flow positive. So what's in the cash flow from operations here? That's not kind of summing up with the income statement.

Go ahead, Jim. Yeah, I'm not sure I understand the tail end of that question. But, Brian, let me provide, you know, color that I think we've provided in the past. So our cash OPEX, I think we've mentioned in the past, we think about 120 to 130 million for this year. We may find that there's a reason to sort of increase that a little bit, but there wouldn't be much more than 140. And that would just be doing things, like I said, putting some early sort of initiatives in Europe, as we've mentioned, There's also some life cycle management stuff we might fire up as well. So still very well managed for 2025. And then if we go into 2026, you know, that'll increment. And I think, again, we mentioned sort of probably go north of 150 million, but it certainly will be managed, you know, not too much aggressively above that. A lot depends on the size of the Europe commercial footprint and if we decide to go along alone. And then I think to your point, you know, then you just got to layer the revenues from the launch. And we've sort of said that's why we've commented in the past. If we think what we've referred to as a modestly successful, I would suggest Q2 is exceeding that. But if we have a modestly successful launch, that's how we see ourselves getting to cash flow positive somewhere in the near term. Hopefully that provides you the guidance you're looking for.

Yep, that's perfect. Thanks, Jim.

Your next question comes from Yale Jen with Laidlaw. Your line is now open.

Good afternoon, and thanks for taking the questions and my congrats as well. Just a little bit in terms of the revenue breakdowns. In terms of the patients that the titrating phase income, their sales versus the maintenance sales, the number is quite a difference. So I'm just curious whether most of the patients in this quarter are already the patients in the trial, so they are actually immediately moved to the maintenance, or there are many more newer patients that are actually in the earlier titration stage? And thanks.

Yeah, thanks, Yale. So as you may remember, only about 60 patients were on the long-term study. in the US, the rest were in the UK. So if you look at 646 start forms, that's a pretty small fraction of it. And as we've said in the past, virtually all of them will be on, are on commercial drug at this time. So it's fair to say that in this quarter, a number of patients are still in the titration phase, or at least part of the quarter they were in the titration phase.

Okay, great, and maybe just one more question in terms of any breakdown in terms of payers between government and the commercial, and thanks.

Too early to tell, Yael. I think we're not quite at steady state yet, but we'll just remind you of the actual split in the population. It's about a third commercial, a third Medicare, and a third Medicaid. So we don't have numbers to provide for this quarter because of all the moving parts.

Okay, great. Thanks a lot. And again, congrats and great quarter. Thank you.

Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Ram Salvaraju with HC Wainwright. Your line is now open.

Hi, this is Jayden for RAM. Congrats on that first quarter. It's been great. So, first, have you seen any reluctance on the part of your prescribers to deploy in patients who have PWS and are also diagnosed with diabetes?

You know, we don't get sort of real-time information on these things, but I think it would be reasonable for a provider to be hesitant if someone has uncontrolled diabetes. If it's diabetes that is controlled, then there's no reason to be reluctant to use GCCR. Of course, you need to be careful and do all the appropriate monitoring per the label, but the drug can certainly be used in patients who have type 2 diabetes.

Okay, great. And just as a follow-up, so looking to the future, are you thinking about expanding your portfolio beyond VICA-XR? And if so, would this potentially include opportunistic in licensing and in what areas?

Yeah, I think it's fair to say that as of today, we are laser focused on the launch of VICAT XR, and we don't want to deviate from that. But I think in the long term, it's fair to say that we would, as a company, need to diversify from just VICAT. And, you know, we will look for opportunities that are likely adjacent to where we are today. but that is certainly not something we would do in the very short term.

Okay, that makes sense. All right, thank you.

Thank you.

There are no further questions at this time. I will now turn the call over to Anish for closing remarks.

Well, thank you all again for calling in, and we look forward to talking to you at the end of the next quarter.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.