Greetings, and welcome to the Soleno Second Quarter 2025 Earnings Conference Call. 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.

Good afternoon, everyone, and thank you for joining us to discuss Soleno Therapeutics Second Quarter 2025 Financial and Operating Results. Please note, we'll be making certain forward-looking statements today. We refer you to Soleno'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 Soleno are Anish Bhatnagar, Soleno's Chairman and Chief Executive Officer; Meredith Manning, Soleno's Chief Commercial Officer; and Jim MacKaness, Soleno'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 30, 2025, on July 10. Therefore, many of you will be familiar with certain key metrics we will 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 Vykat 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 Soleno in March, when we launched Vykat XR, the first FDA-approved medicine for the treatment of hyperphagia in adults and children 4 years of age and older with PWS. The approval of Vykat XR was based on our comprehensive clinical development program in which participants received double-blind and/or open-label Vykat XR for a mean duration of 3.3 years. Primary evidence of efficacy came from a 16-week randomized withdrawal Phase III multicenter, double-blind, placebo-controlled trial. Following FDA approval on March 26, Vykat XR was available on April 14, 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 Vykat 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 Vykat 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 through 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 Vykat 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 in 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 U.K. We have conducted market research with many PWS experts, patient advocacy leaders, care home executives, etc., 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.

Thank you, Anish, and good afternoon, everyone. As Anish mentioned earlier, we are still in the early stages of our launch, and the feedback from both families and providers has been very encouraging. This indicates that our outreach to caregivers, individuals with PWS, physicians, centers of excellence, payers, and advocacy groups is resonating well. Our disciplined execution and clear messaging are helping us build confidence in the field. Together, these factors bolster our confidence in the significant potential ahead. I would now like to update you on the key performance indicators we believe are important for tracking our progress. The first indicator is patient start forms. In our preliminary results press release on July 10, we reported receiving 646 patient start forms from our launch through June 30. Most of the individuals starting treatment are younger, specifically between 4 and 26 years old. However, many of these individuals are older than what we observed in the clinical trial C601, which had an average age of about 13.5 years. The second key performance indicator is the number of prescribers. From our launch through June 30, we had 295 unique prescribers. More than one-third of the top 300 prescribers, who account for approximately 2,000 patients, have issued prescriptions. We are also encouraged by the number of start forms coming from prescribers we did not anticipate hearing from this early in our launch. We believe the momentum and positive results are a reflection of our strategic launch efforts, particularly initiatives aimed at pediatric and adult endocrinologists, geneticists, and psychiatrists who treat or influence a significant portion of our target market. Our field team is focused on engaging deeply with top-tier providers, many of whom treat multiple individuals with PWS. This is not only to enhance their experience and confidence with Vykat XR but also because these key clinicians play a crucial role in shaping practice patterns and the broader adoption of new therapies in the PWS community. We are also seeing a strong response from physicians beyond this core group, indicating growing awareness of Vykat XR and recognition of the need to treat hyperphagia. The third performance indicator is payer policies. As Anish mentioned, securing broad coverage for Vykat XR is essential for our launch's success. We have experienced rapid and extensive coverage surpassing other recent rare disease launches, with about 33% of all insured lives now covered, which translates to just over 100 million lives in the United States. We are pleased with the payer coverage policies established for Vykat XR so far, including those from major insurers, and it is notable that we are getting coverage across all channels: commercial, Medicaid, and Medicare. The rapid access we are seeing is extraordinary. These positive outcomes result from our proactive engagement, which has allowed payers to quickly recognize the value of Vykat XR and the urgent need to address hyperphagia related to PWS. I will now hand 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 3 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 Vykat XR and become cash flow positive while in parallel progressing towards regulatory approvals and commercialization either on a stand-alone 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 Vykat XR was approved in March of this year, the company generated no revenue in the second quarter ended June 30, 2024. Cost of goods sold was $0.7 million for the second quarter ended June 30, 2025. Please note that prior to the FDA approval, costs associated with manufacturing Vykat XR were expensed as research and development expenses. As such, a portion of the cost of goods sold during the period included inventory at cost. Going forward, as we continue to sell Vykat XR, we will deplete our inventory and replenish it with 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 noncash stock-based compensation compared to $12.3 million, which includes $2.7 million of noncash 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, the timing of manufacturing, and other projects as we've moved through submission, approval, and now preparation for commercialization. Selling, general, and administrative expense for the second quarter ended June 30, 2025, was $28.2 million, which includes $7.3 million of noncash stock-based compensation compared to $10.9 million, which includes $4.5 million of noncash stock-based compensation for the same period of 2024. The increase reflects our ongoing investment in additional personnel and new programs to support the Vykat XR commercial launch and in support of our increased business activities. Total other income net was $1.8 million for the 3 months ended June 30, 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 share for the second quarter ended June 30, 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.

Thank you, Jim. In closing, while we are still early in the launch of Vykat 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 Vykat 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.

Your first question comes from Yasmeen Rahimi with Piper Sandler.

Many of our clients are curious about how monthly scripts in July compare to earlier months. How do you anticipate changes as we move into the rest of August and September? I would appreciate any insights you can provide. Additionally, what is the current time to fill, and how do you foresee it changing over time? I'll return to the queue after this.

Okay. Thanks, Yasmeen. I'll take the July question. And 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 Vykat 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.

Yes. Thank you. Thanks, Yasmeen, 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, 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 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.

Your next question comes from Ry Forseth with Guggenheim.

This is Ry from Debjit's team. Are there any emerging pain points during the patient start form process that you see as addressable in the next couple of quarters? And our second question is, how are early compliance trends tracking?

We are seeing a very strong start with 646 patient starts in the first quarter, which is a significant number. We monitor factors such as seasonality, holidays, vacations, and summer breaks. Since this is the first launch of a drug for hyperphagia, it's difficult to predict the challenges we might face with the start forms. However, the upcoming quarters will provide us with valuable insights, and we will keep you updated. Your second question was...

Compliance.

Yes. So it's too early to tell, Ry, 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.

Your next question comes from Kristen Kluska with Cantor.

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?

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 the post-marketing setting is quite different from clinical trial settings. So one typically relies on reports from caregivers or health care providers, and the patients that you're treating are also often not as controlled and may have more comorbidities, etc. 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. Kristen, yes, well, as you know, there are quite a number of moving parts between the 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.

Your next question comes from Tyler Van Buren with TD Cowen.

Congratulations on the tremendous progress made during the quarter. So regarding the $33 million of Vykat 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 you commercially you're seeing older patients than the 13.5 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, do you want to take the bolus stocking question?

Yes. Regarding the stocking question, we have one distribution partner, PANTHERx. They have been managing their business very carefully, ordering from us weekly while maintaining a small inventory of about 7 to 10 days. We haven't observed anything unusual in their ordering patterns. It's been a consistent weekly stocking process, and that has not changed. I don't think there are any anomalies there. As for the bolus question, we believe there was a strong influx of start forms in Q2. However, it's hard to predict that this trend will continue at the same rate moving forward, so we expect some moderation. Overall, everything currently suggests a robust launch ahead.

And Tyler, to your question about patient weight, 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 13.5 years. So I think it's a reasonable assumption that they are heavier as well.

Your next question comes from James Condulis with Stifel.

Congratulations on the quarter. I have a question regarding the patients and start forms you're observing, which is a great start. Are these patients visiting doctors on their regular schedule, or are they trying to get in outside of that? I'd like to understand that dynamic better. More generally, everything appears to be functioning well, so I'm curious about what might limit progress moving forward, if there’s anything that's clear to you.

Meredith, go ahead.

Yes, 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 are very proactive as they were anticipating the launch of Vykat XR, getting some of their appointments set up within an early time frame. 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 Gershell with Oppenheimer.

Thanks for the update and tremendous progress. I wanted to ask 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 Vykat XR earlier, as in Q2 and currently. And if we should maybe think about a broader uptake as physicians become more familiar with the drug. Also want to ask with respect to Europe. I know that's probably going to be 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?

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 the presence of hyperphagia is sort of on label and the age of 4 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 the drug. 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, etc., and getting prescriptions from there. In terms of the EU business and OpEx, Jim, you want to take that?

Yes, sure. So I think, Leland, you said, 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've 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. 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 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 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.

Your next question comes from Brian Skorney with Baird.

Congratulations on being the first company in my career to have a sequential decline in operating expenses in the first quarter following a launch; that's quite impressive. With that in mind, Jim, I'm curious whether the operating expenses you've provided are a reasonable figure to use for modeling the U.S. business going forward. It appears that you spent $12.5 million in cash operationally. When I look at the income statement, there were $32.7 million in sales and about $40 million in operating expenses. If I exclude stock-based compensation, that reduces the operating expenses by $10 million. Therefore, I would have expected us to be cash flow positive from operations. Can you clarify what's reflected in the cash flow from operations that doesn't seem to align with the income statement?

Go ahead, Jim.

I'm not quite sure I grasp the final part of your question. However, Brian, let me clarify what we've shared previously. Our cash operational expenses are estimated to be between $120 million and $130 million for this year. While we might see a need to slightly increase that amount, it shouldn't exceed $140 million. This would likely involve some preliminary initiatives in Europe, as we've discussed. Additionally, there are some lifecycle management projects we might initiate. Overall, we are managing this well for 2025. Looking ahead to 2026, we expect an increase, probably surpassing $150 million, but we will keep it under control and not go too far above that threshold. Much will depend on the size of our commercial presence in Europe and whether we choose to venture alone. Regarding your point, we also need to consider the revenue from our product launch. We pointed out previously that if the launch is modestly successful, we expect Q2 to outperform that expectation. If we achieve a modestly successful launch, that's how we believe we can move toward becoming cash flow positive in the near future. I hope this offers the guidance you were seeking.

Your next question comes from I-Eh Jen with Laidlaw.

Congratulations as well. I wanted to discuss the revenue breakdown. The income from sales during the titrating phase compared to maintenance sales shows a significant difference. I'm curious whether the majority of the patients this quarter are those already in the trial who transitioned to maintenance, or if there are many new patients still in the early titration stage.

Yes, thanks. As you may recall, only about 60 patients were involved in the long-term study in the U.S., with the remainder in the U.K. When looking at the 646 start forms, that represents a relatively small portion of the total. As previously mentioned, nearly all of these patients are currently on commercial drug. Therefore, it's reasonable to say that in this quarter, a significant number of patients were still in the titration phase or at least a part of the quarter they were in that phase.

Okay. Great. And then maybe just one more question in terms of any breakdown in terms of the payers between government and commercial...

Too early to tell, I-Eh. 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 one-third Commercial, one-third Medicare, and one-third Medicaid. So we don't have numbers to provide for this quarter because of all the moving parts.

Your next question comes from Ram Selvaraju with H.C. Wainwright.

This is Jade on for Ram. Congrats on that first commercial quarter. 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?

We don't receive real-time information about these situations, but it seems reasonable for a provider to be cautious if a patient has uncontrolled diabetes. However, if the diabetes is managed, there shouldn't be any hesitation to use DCCR. It's important to exercise caution and conduct all necessary monitoring according to the label, but the drug can definitely be used by patients with type 2 diabetes.

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

Yes. I think it's fair to say that as of today, we are laser-focused on the launch of Vykat 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 Vykat. And 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.

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.