Soleno Therapeutics, Inc. (SLNO) Earnings Call Transcript & Summary

Okay. Hi. Good afternoon, everybody. This is Kristen Kluska at Cantor. Very happy to be hosting Soleno Therapeutics. We have Dr. Anish Bhatnagar, CEO; and Jim MacKaness, CFO. Thank you both so much for being here. Really appreciate it.

Thanks for having us, Kristen.

Absolutely. So I'll start with the most boring question I can think of, which is just giving us a high-level overview of the company, and then we'll get down into some of the specifics.

Sure. So for those of us who don't know us, Soleno Therapeutics -- Kristen is adjusting her mic. We'll give her a minute. Soleno Therapeutics is in the rare disease space. We have a recently approved drug for PWS or Prader-Willi syndrome. We have just launched in the U.S., and that is our current focus. We're in the midst of -- we have filed in Europe as well, and we're in the midst of assessing the other opportunities for the drug.

Okay. So up until the approval of Vykat XR, these patients had no treatment options besides addressing their growth hormone. As a result, how often were these patients checking in with their physicians? And now that this drug is available, how might that dynamic change?

Based on claims data, we see that the younger patients who are more likely to be on growth hormone had about 4 to 6 touch points a year with health care providers. And this would be all health care providers, not just the pediatric endocrinologists. We also saw that older patients had less, maybe 2 touch points with health care providers. In terms of how this would change with the drug, it really depends on, I think, the age and what stage of treatment they're in. I would imagine that early on in treatment, there will be more touch points. But as people are more stable, have been on drug for a while, the number of touch points would be probably the same as they were earlier.

Okay. If there's a doctor who perhaps sees a significant amount of patients then, are you hearing openness to treat as many patients as possible upfront? Or do they want to space this out so they can properly see them in the clinic? I would imagine when you go from seeing somebody 2 times a year to a new drug kind of changes your scheduling book quite a bit.

So I think it varies. Firstly, it's early to make some broad judgment on the trends. But what we have seen is that the practices for the KOLs are pretty busy. We see that it would not be trivial for them to insert someone into a practice at a short notice. So you may have seen from our second quarter numbers, 646 patient start forms and 295 prescribers. So we think that the 295 really is a reflection of providers who were not part of the KOL group doing the prescriptions. And that could be a result of the fact that it's not easy to get into the KOL practices. So they probably call their local endo, say this drug is approved, we'd like to start it. And we are aware of situations where these peripheral endocrinologists have then called the KOLs to talk about the patient and discuss it before starting them on drugs.

Okay. So once a physician and a patient mutually agree that they would like to start this therapy, what steps are they taking? Any background labs or any other work that needs to be done?

Yes. So the idea is that -- when a physician writes a prescription, the idea is that they've already evaluated the patient and decided they are an appropriate candidate. So the only real lab that would be needed would be hemoglobin A1c, perhaps fasting glucose levels to see what their glycemic status is. But once they decide it's the right patient, once the patient and family agree, they would fill out a start form and send it to our specialty pharmacy, which is PANTHERx. It would -- Panther would then look at the form, if there's any corrections or completions to be done, they would do that. But they would then start a benefits investigation for the patient to figure out what's their insurance, are they eligible, et cetera. Depending on the insurance, if it's commercial, if there's a policy in place, it could be a pretty rapid turnaround. There could be situations like specific state Medicaid programs, which can take a lot longer. But in general, once the benefits investigation is done, the patient would receive drug. And there can be situations where a physician can check a box for a quick start, which means that the physician says, this is a patient that I would like to see on drug as soon as possible. So in those cases, it is possible to provide drug before the benefits investigation is done for them.

Great. You now have some long-term data from the trial experience. Can you talk about what's been observed over the longer term, perhaps the top 3 benefits that you often hear being shared?

Yes. I think the most obvious benefit is the improvement in hyperphagia. And hyperphagia sort of comes in many different forms, but it's the food-seeking behavior whether they manifest as anxiety and constantly talking about food or stealing food or being aggressive about food, something like that, changes to that would be the most obvious ones. There are more subtle changes that have been noted over longer periods of time. So for example, we still relate this to improvements in hyperphagia, but the fact that these patients then have more sort of brain space to think about other -- we've noticed improvements in school performance, people taking up jobs, being able to take care of things in the house. So those are sort of derived benefits. And then finally, the behaviors that are typical of PWS, which may or may not be food related. We've also shown improvements in those behaviors in the published long-term data.

And in a commercial setting, how are these benefits going to be measured? I would imagine a lot of it is just going to be anecdotes.

Yes. I think from a payer perspective, what we are seeing so far is the physician attestation is probably going to be the same. I think the anecdotes from the perspective of families and clinicians will be important. So for example, recently, we were sent a screenshot of a mother commenting that my child, so and so woke up at 7:45 a.m. today, which apparently is very unusual because these kids wake up really early because they're hungry. And it's 9:45 and they still haven't asked for breakfast. So it's subtle, but it means a lot to these families. We have one patient who's been on drug for a long time, who we understand is a sous-chef. So for these patients to be around food for a living would otherwise be impossible.

That's awesome. And what are you hearing just about how long physicians are going to give the drug a try and see if they're responders. It's obviously not a treatment that works overnight.

Yes. It's a point of education for us. We -- obviously, the people who treated patients on the trial are aware of it. And our published long-term data clearly shows that while a lot of patients might see effects early on, maximum effects can take 6 to 9 months. So it's something that we educate people on all the time. And if you look at the policies that have already been written, those are all 6- to 12-month policies. So we see that as the norm, which is good.

Okay. And then going back to my earlier point about different benefits you're seeing in real world, do you think there's more than one layered definition of patients going to be defined as a responder?

2 I think in the real world, you probably won't formally define a responder. But I think to the extent the physician needs to attest to the fact that there is a benefit, it can be a more generic look rather than like a hyperphagia score changing, for example. As you know, the hyperphagia score is not really done in clinical practice. So yes, I think it will be more of a general statement.

Okay. From a high level, what are you seeing from a safety side in commercial use? How does this compare to the trial experience?

So the side effects that we see, hyperglycemia related, peripheral edema or fluid retention related are similar to what we expect from the known side effect profile of the drug. I think the one thing you see that is different in the commercial setting and is no different with our setting is that patients tend to be a lot less controlled, may have more comorbidities than the clinical trials. And also in clinical trials, you're seeing your doctor very often, which is not the case in the commercial setting. So there is potential for these side effects to be more significant in some situations than others.

So yes, just on that note, you're now in a commercial setting. You have patient baseline and demographic factors that are a lot different. Is there any guidance or thoughts that you would kind of handle with these doctors to walk through how their experience on the drug might look different from somebody else's?

I think it depends on the doctors. The KOLs seem very comfortable with the drug. They understand the parent molecule as well because they are pediatric endocrinologists. They've used the parent molecule. They've used Vykat or DCCR in trials, so they understand it. There are definitely physicians who may not have experience with the drug who might need more sort of handholding, as you say. But we have many opportunities to do that. It starts with the marketing materials that have been created for health care providers, for families, et cetera, which underscores some of the side effects and what can be done. We have marketing campaigns that highlight some of these things. We have speakers bureaus that are in place now. Our specialty pharmacy has multiple touch points with families. Every time there is a titration step, they will get a call from the specialty pharmacy. Similarly, every time there is a refill, they will get a call from the specialty pharmacy. So there's many occasions to touch upon this.

Okay. Something we get asked from investors is just on side effect profiles, things like edema, is this something that tends to show up within the first few months of treatment? Is there any reason to think that if you've been on the drug for 2 years that it might start to show up then? Essentially I'm trying to figure out right away, do you kind of know if you're going to be susceptible to some of these side effects?

So generally, what we've seen in the clinical trials is that if you're going to have these significant side effects, you're likely to see them in the first few months. Now that obviously accounts for stability and other things around. But I'll give you an example of where that might not be the case. So for example, there is a patient who was on a trial -- on our trials for many years, was also at the same time on a glucose lowering medication as well as on growth hormone. There was some set of circumstances that led the insurance company to deny coverage for the glucose lowering medication, so that was discontinued. And at the same time, the patient was also increased on their growth hormone dose, while the DCCR dose remained the same. That's exactly the situation where you might get in control, as you can imagine. But those are unusual situations, which can definitely be taken care of by close monitoring by a physician.

And then to that same point, just the seriousness of it, does this tend to happen overnight? Or are there truly signs that one can kind of look out for at least stop the drug before it maybe gets to a more serious point?

Yes. The good thing about things like hyperglycemia and peripheral edema fluid retention is that they're trackable. And in the trials as well as in clinical practice, you can see this happening. So glucose is tracked using a glucometer, so you can track that quite easily. For peripheral edema, if you're lean, you can see grade 1 peripheral edema around the ankle, which is pretty obvious. The challenge happens if you have an obese patient because their peripheral edema is harder to discern. So you might progress to further stages of fluid retention otherwise -- than you otherwise would. So generally, these things are trackable. If physicians are paying attention, they should look at symptoms instead of just the physical signs as well. They should all be trackable. They should never happen in an overnight type of setting.

Okay. So putting it all together, we understand Vykat XR is not a perfect drug. There are side effects, but how should we be thinking of the risk reward profile in the context of PWS and what these patients go through every day?

You understand the disease now. You've been looking at it for some time. It's a terrible disease with significant effects not only on the patients themselves, but also on the families, on siblings that have PTSD. Any help that you can provide to families with regard to improving hyperphagia is a really big deal. To the extent you have side effects that can be managed, we think the risk reward profile makes sense. You have to pick your patients appropriately. You have to make sure you're monitoring them appropriately. But if all that is the case, we believe the risk reward profile is very significantly in favor of the benefit.

Okay. And then just on reimbursement dynamics. Have some channels been easier to access so far? And are there differences maybe as we think about things on a state-by-state basis?

Jim?

Yes. So payer access is going pretty well. We would anticipate and we've seen commercial coming on at a more rapid clip, if you like, which is to be anticipated. We commented at the end of the second quarter, we had 100 million lives covered. Still work to be done, obviously. Various states take reimbursement straight away on FDA approval for Medicaid. Medicare just takes more time. We have seen reimbursement through all 3 channels. So we think we've got things off to a very good start with the first quarter from launch.

Great. And then it is a weight-based dosing. So can you just give a rough sense about what we're seeing so far and how we should be thinking about if any tricks -- trends, excuse me, are likely to shift over near term, longer term?

So what we have said is that a vast majority of the patients who are on drug since launch are less than 26 years old. And this is what we had expected going in because based on claims data, these are the patients who have more touch points with health care providers. And we think this is a function of the fact that they are likely on the insurance of their parents and the fact that they are living with families who are able to take them to appointments, et cetera. So this is a bit different from what we had in the clinical trial setting, which was an average age of 13.5 years and an average weight of 61 kilograms. So I think it's fair to assume that if you're below 26 but between 4 and 26, your average weight is probably higher than the 61 kilograms. It's hard to comment on the overall trends over the long period of time because this is -- this 4 to 26 years population is likely the one that will remain the dominant one. But we do expect to start seeing older patients as well, including those from group homes start to come into the picture.

Okay. So on one end, there's going to be some patients that will be getting older, naturally gaining weight as a result of it, but then you're going to have some that are maybe older and kind of peaked or maybe even losing weight depending on where they are in their life.

Possible.

Okay. So clearly, your 2Q print was a very surprise for all of us. I think you absolutely -- I know you absolutely crushed my numbers, but I think you did the same for consensus. So as we all kind of start to rumble and think about 3Q, we're clearly excited, right? But why should we not get over our skis quite yet?

Well, I think a couple of things we've come to. You said, yes, we thought a really, really strong Q2, 646 start forms. We mentioned you can't necessarily expect that to go linear times 2, times 3, times 4. That was a bolus. We would anticipate that would moderate, but we continue to see a very healthy of start forms coming in. So that's great. We're just mindful of people sort of when they build their models to make sure they understand there's some latency between the start form to actually getting through to getting patients active and then you've got to make sure you understand the free drug to the paid drug profile. But as I said, we did 100 million lives, which is great. But there are still situations where health care providers may be slow to come forward because they just don't want to go through the hassle of dealing with payers at this stage. So there's a couple of things that we'll continue to work out, but we think the dynamics are set up very, very well. But to your point, we just mind people not to get over their ski tips.

Okay. Some of those factors life covered, you think like by '26 or that some of those factors like, for example, the physicians will say, okay, things are at the center now. We don't have to deal with the hassle anymore. So like mid next year, maybe a lot of those things ironed out?

It should be. Yes. I mean we'll -- we think we'll continue to make just some really good solid progress over the next couple of quarters. Yes, work these things through.

We'll be excited, but we won't get too excited yet then. Okay. So Europe, another big opportunity. I know we've spoken at length about patient size, but seems like based on some of the research you're doing there, it might be bigger than you once thought or you're appreciating the opportunity perhaps a little bit better now.

I think it's the latter. I think from a numbers perspective, we are confirming with primary work on the ground that the EU4 plus U.K. has about the same number of patients as the U.S. The EU 27 has more. What we are seeing based on our work is how structured care is in some of those countries. So places like France, for example, have true centers of excellence where virtually every patient with PWS might be seen as one of them. Similarly, Germany is also very organized as is Italy, Spain and U.K. less so. So we are more excited about the opportunity. We've been in touch with a lot of KOLs there. There's a lot of excitement for the drug. So we remain firmly in 2 minds on how to best do that. We are cognizant of the MFN situation as well, which leads us to wanting to have more control over pricing.

Okay. I think sometimes when investors look at your stock and the action over the last few years, they say, great run, but we missed out. Why is that not the case?

I think if you look at the global opportunity, this is one of those rare diseases that's rare, but it's clearly not ultra rare. There are so many patients with this. The unmet need is so significant. Nothing has worked. So if you discount everything else and you just think about that fact, I think this is a very significant opportunity.

So what's the current financial situation of the company? I know obviously, you're revenue generating, so we need to factor that in as well.

Yes. So very strong. We did do a raise in July. Prior to that, we'd actually mentioned that looking at the U.S. launch and anticipating at that stage, what we call a modest launch, we saw a line of sight to cash flow positive even before the financing. And obviously, Q2 came out very strong. So that firms up that confidence. We did do the raise. We thought there was a sensible time to do it. It does allow us to be a bit more aggressive in things like Europe. So it allows us to have confidence to put some at-risk investments in Europe to keep the momentum going and also do some life cycle stuff in the future. So overall, we think we're in a very strong financial situation.

Okay. And I'll close -- I'll turn the floor to you and ask if there's any closing remarks or anything I should have asked you that I didn't.

Well, thank you for your support. I think that this has been a great couple of years. And we -- as you remind us often, 2 years ago is at this conference where we announced the results. And since then, it's been great. So I appreciate the support and all the support from the audience here.

Yes. It has been an awesome journey. I'm just along for the ride, but it's been a great one. So congrats on all your success, and we're still rooting for you as much as we were then. So thank you.

Thank you very much.

Thank you.