Soleno Therapeutics Faces Investor Lawsuit Over Alleged Safety Disclosures and Stock Drop

In March 2025, the company celebrated FDA approval and touted VYKAT XR as safe, effective, and positioned for a strong commercial launch. 

Investors in Soleno Therapeutics (SLNO) have filed a lawsuit alleging that the company misled the market about safety risks tied to its only commercial drug, VYKAT XR, and its commercial prospects. The complaint claims that a series of critical reports and safety-related disclosures later revealed risks that allegedly contributed to Soleno’s sharp stock price declines during the class period.​ 

Between March 26, 2025, and November 4, 2025, the lawsuit alleges that Soleno’s stock traded at artificially inflated levels before dropping after a short-seller report, a death disclosure tied to VYKAT XR, and mounting reports of adverse events and commercial pushback. The complaint links declines of about 12 percent in August 2025, 19 percent in September 2025, and 27 percent in November 2025 to the market’s reaction to this emerging information, and seeks to represent investors who purchased Soleno common stock during the class period.​ 

Investors who purchased Soleno common stock between March 26, 2025, and November 4, 2025, may wish to learn more about the allegations and evaluate potential eligibility to pursue claims.​ 

Soleno’s Business and Product Focus 

According to the complaint, Soleno Therapeutics is a biopharmaceutical company headquartered in Redwood City, California, focused on developing therapies for rare diseases. At the time of filing, Soleno’s only commercial product is VYKAT XR (diazoxide choline extended-release tablets), approved to treat hyperphagia in individuals with Prader-Willi syndrome.​ 

The complaint explains that Prader-Willi syndrome is a rare genetic condition characterized by hyperphagia beginning in childhood, leading to obesity and related complications such as type 2 diabetes, cardiovascular disease, and increased mortality. Prior to the start of the class period, there were no FDA-approved treatments for hyperphagia in this patient population, and Soleno positioned VYKAT XR as a first-in-class therapy based on its Phase 3 development program.​ 

Soleno’s development story for VYKAT XR evolved over several years, including an initial Phase 3 trial that did not meet its primary endpoint, an open-label extension, and a later randomized withdrawal study that produced statistically significant results on hyperphagia scores. The FDA granted Breakthrough Therapy Designation in 2024 and accepted Soleno’s New Drug Application, ultimately approving VYKAT XR on March 26, 2025.​ 

Allegations Around Safety, Efficacy, and Commercial Risks 

The lawsuit centers on allegations that Soleno and certain executives misrepresented or failed to disclose material safety data and risks associated with VYKAT XR during the class period. The complaint asserts that the company’s Phase 3 program allegedly downplayed or concealed evidence of significant safety concerns, including issues related to fluid retention in clinical trial participants.​ 

Plaintiffs allege that, as a result of these omissions, the administration of VYKAT XR to treat hyperphagia in Prader-Willi patients posed materially greater safety risks than investors were led to believe, particularly around fluid retention and related complications. The complaint further claims that VYKAT XR had lower commercial viability than suggested, with undisclosed risks of widespread post-launch adverse events, higher discontinuation rates, lower patient adoption, prescriber reluctance, and potential regulatory and reputational fallout.​ 

The filing highlights that these alleged omissions and misstatements are claimed to have been significant to the market, given that VYKAT XR is Soleno’s sole commercial product and the primary driver of its revenue and valuation during the class period.​ 

Investors interested in this case may want to follow ongoing developments to better understand how the allegations relate to Soleno’s risk profile and disclosure practices.​ 

What Management Said During the Class Period 

The complaint details multiple statements by Soleno’s senior management during the class period, focusing on the approval, safety profile, and commercial rollout of VYKAT XR. On March 26, 2025, Soleno announced FDA approval of VYKAT XR, stating that the approval was based on an “adequate and well-controlled study” and safety data from a comprehensive clinical development program, and emphasizing statistically significant results from the randomized withdrawal Phase 3 study.​

In that announcement, Soleno described VYKAT XR as having a “well-established safety profile” with over four years of data, listing common adverse reactions such as hypertrichosis, edema, hyperglycemia, and rash. On the same day’s investor call, the CEO highlighted the strength of the Phase 3 extension data, described VYKAT XR’s label as reflecting a favorable safety and tolerability profile, and noted the absence of boxed warnings, diabetes contraindications, or a REMS program.​ 

In May 2025, Soleno’s first-quarter release and call emphasized the significance of FDA approval and early commercial interest, with the CEO citing high levels of patient start forms and unique prescribers and stating that the company was well-positioned to sustain momentum and create long-term value. The company’s Form 10-Q for the quarter reiterated that approval followed demonstration of safety and efficacy through well-controlled clinical trials, framing FDA approval as the product of a rigorous process requiring substantial evidence from such trials.​ 

In June 2025, at an investor conference, the CFO described the randomized withdrawal data as “strongly statistically significant” for hyperphagia and characterized the safety profile as consistent with the parent molecule diazoxide, describing common adverse events as typically self-limiting and manageable through dose adjustments or brief interruptions. The CFO also stated that only two severe adverse events had been reported throughout the clinical program, while noting continued engagement with the Prader-Willi community and key opinion leaders.​ 

The complaint also cites July and August 2025 disclosures that highlighted early revenue from VYKAT XR, rising patient start forms, and unique prescribers, with the CEO describing the launch as “truly transformative” and expressing optimism about Soleno’s trajectory and ability to create long-lasting value for shareholders. On an August 2025 call, the CEO characterized discontinuation rates as substantially lower than in clinical trials, asserted very high compliance rates, and said there were no new safety signals in postmarketing experience compared to the clinical trial setting.​ 

How the Alleged Corrective Disclosures Unfolded 

The complaint describes several events that allegedly revealed previously undisclosed information and coincided with stock price declines. On August 15, 2025, short seller Scorpion Capital published a 415-page report criticizing Soleno’s clinical trial conduct, the safety and efficacy of VYKAT XR, and the commercial launch, including interviews with trial investigators and former employees and screenshots of parent reports of severe adverse reactions.​ 

According to the filing, the Scorpion report alleged that key trial investigators broadly rebuked VYKAT XR as ineffective and dangerous, questioned the reliability of the randomized withdrawal study, and raised concerns about risks of diabetes, fluid retention, pulmonary edema, and heart failure. The report also cited social media posts from parents describing rapid weight gain from fluid retention, difficulty walking, hospitalizations for potential heart failure, and rising blood sugar levels, as well as claimed interviews with former employees who alleged pressure to downplay adverse events.​ 

Following the report’s publication, the complaint states that Soleno’s stock price fell from more than 77 dollars per share on August 14, 2025, to about 68 dollars per share on August 18, 2025, a decline of nearly 12 percent over two trading days on above-average volume. The complaint alleges that the shares remained artificially inflated because the full truth about safety data and risks had not yet been disclosed.​ 

On September 10, 2025, Soleno filed a Form 8-K disclosing that a patient had died after taking VYKAT XR, noting that the treating physician and the company considered the case not related to the treatment. In the same filing, Soleno described VYKAT XR as having a “proven safety and efficacy profile,” emphasized that it was approved following a rigorous clinical program, and noted that patients with Prader-Willi syndrome have significant comorbidities and reduced life expectancy, citing a mortality study.​ 

In response to this disclosure, Soleno’s stock price allegedly fell from more than 70 dollars per share on September 9, 2025, to approximately 57 dollars per share on September 11, 2025, a decline of about 19 percent over two trading days, with elevated trading volume. The complaint again alleges that the price remained inflated as defendants continued to make allegedly misleading statements about safety and postmarketing experience.​ 

The filing notes that Scorpion Capital subsequently submitted a Citizen Petition to the FDA on August 21, 2025, and used social media to highlight adverse event reports and question Soleno’s explanations of the death. By late October 2025, Scorpion publicly stated that 83 adverse events, including 20 serious cases, had been uploaded to the FDA’s adverse event database, with later updates citing 282 total cases, 57 serious cases, and 1 death.​ 

On November 4, 2025, Soleno reported third-quarter 2025 financial results, and the CEO acknowledged that the Scorpion report caused a “disruption” in the VYKAT XR launch, including concerns in the Prader-Willi community, a lower number of patient start forms, and increased discontinuations. Shortly thereafter, Scorpion reposted a mother’s social media account reporting that her son had suffered congestive heart failure after taking VYKAT XR.​ 

Following these developments, the complaint states that Soleno’s share price fell from nearly $64 per share on November 4, 2025, to about $47 per share on November 5, 2025, a one-day decline of approximately 27 percent on above-average trading volume. Overall, the filing asserts that Soleno’s stock declined from a class-period high of more than 90 dollars to below 45 dollars, a drop of about 50 percent, and that the shares remained well below their pre-approval level of around 50 dollars at the time of filing.​ 

Investor Impact and Key Takeaways 

From an investor’s standpoint, the complaint frames the case as an alleged mismatch between Soleno’s public messaging on VYKAT XR’s safety, efficacy, and commercial trajectory and information later brought to light by a short-seller report, adverse event data, and company disclosures. Plaintiffs allege that Soleno’s emphasis on a favorable safety profile, low discontinuation rates, and strong early launch metrics did not fully reflect risks tied to fluid retention, hyperglycemia, and other serious adverse events observed in trials and early commercial use.​ 

The filing further claims that as the market absorbed Scorpion Capital’s allegations, the reported death, and additional adverse event reports, investor expectations for VYKAT XR’s long-term adoption and revenue potential reset lower, contributing to the observed stock price declines. Because VYKAT XR is identified as Soleno’s only commercial product, the alleged issues around its safety profile and adoption curve are portrayed as central to the company’s valuation during the class period.​ 

According to the complaint, shareholders who purchased Soleno common stock at prices allegedly inflated by the challenged statements and then held through the subsequent corrective events suffered significant economic losses.​ 

Shareholders who traded Soleno shares between March 26, 2025, and November 4, 2025, may wish to monitor the case, review their trading history, and consider whether to seek additional information about potential recovery options.​ 

Alleged Legal Violations and Claims 

The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 against Soleno and certain current and former executives. Plaintiffs allege that the defendants made materially false and misleading statements or omitted material facts about VYKAT XR’s safety profile, the conduct and results of its Phase 3 clinical program, and the drug’s post-approval risk and commercial outlook.​ 

The filing contends that these statements allegedly operated as a scheme to defraud the market by keeping Soleno’s stock price artificially high and that when the alleged truth emerged through the various events described, the stock price declined, causing investor losses. The complaint also alleges that the individual executives acted as controlling persons of Soleno, with access to nonpublic information and responsibility for the company’s public disclosures, and therefore are liable under Section 20(a).​ 

Plaintiffs assert that the company and its executives acted with scienter, pointing to the centrality of VYKAT XR to Soleno’s business, their involvement in the drug’s development and launch, and insider stock sales and capital raising during the class period, including a July 2025 secondary stock offering that raised approximately 230 million dollars in gross proceeds. The complaint seeks compensatory damages for the proposed class, along with costs and other relief as the court may deem appropriate.​ 

Investors who believe they may be part of the proposed class can review the filed complaint and consider contacting counsel or other resources to better understand their rights and potential next steps.​ 

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