Soleno Therapeutics(SLNO) - 2024 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements Unaudited condensed consolidated financial statements reveal significant asset growth and increased net loss from higher operating expenses Condensed Consolidated Financial Statements Total assets grew to $304.1 million, driven by cash and marketable securities, while net loss widened to $43.3 million due to escalating operating expenses Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Items | June 30, 2024 (unaudited) | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $57,024 | $169,681 | | Marketable securities (current & long-term) | $237,581 | $0 | | Total Assets | $304,131 | $180,691 | | Total current liabilities | $9,150 | $11,505 | | Total Liabilities | $23,374 | $23,184 | | Total Stockholders' Equity | $280,757 | $157,507 | Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $12,342 | $5,141 | $26,944 | $10,457 | | General and administrative | $10,889 | $3,169 | $19,361 | $6,023 | | Operating Loss | ($24,868) | ($8,623) | ($48,343) | ($17,092) | | Net Loss | ($21,854) | ($8,475) | ($43,252) | ($16,831) | | Net loss per share | ($0.57) | ($0.81) | ($1.16) | ($1.69) | Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($30,179) | ($12,294) | | Net cash used in investing activities | ($236,165) | $0 | | Net cash provided by financing activities | $153,687 | $17,060 | | Net (decrease) increase in cash | ($112,657) | $4,766 | Notes to Condensed Consolidated Financial Statements Notes detail DCCR development, NDA submission, strengthened liquidity from a public offering, and increased stock-based compensation - The company's lead candidate is DCCR for Prader-Willi syndrome (PWS). It received Breakthrough Therapy designation in April 2024 and an NDA was submitted to the FDA on June 28, 2024[11] - The company believes its current cash, cash equivalents ($57.0M), and marketable securities ($237.6M) are sufficient to fund operations for at least the next twelve months. This position was strengthened by a May 2024 public offering that raised gross proceeds of $158.7 million[12] - The company entered into a new five-year office lease in Redwood City, CA, commencing September 1, 2024. Total future lease obligations, including the new lease, amount to $3.9 million[26][28] - Stock-based compensation expense for the six months ended June 30, 2024, was $13.6 million, a significant increase from $1.8 million in the same period of 2023[39] - As of June 30, 2024, the fair value of the contingent liability for the Essentialis purchase price was estimated at $13.6 million, an increase of $2.0 million since year-end 2023[20][21] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A discusses DCCR development, significant operating expense increases, and strong liquidity bolstered by recent equity financing Business Overview Soleno focuses on DCCR for Prader-Willi syndrome, with recent milestones including Breakthrough Therapy Designation and NDA submission - The company's primary focus is the development and commercialization of DCCR for Prader-Willi syndrome (PWS)[48] - The FDA granted Breakthrough Therapy Designation for DCCR in April 2024, and the company submitted an NDA to the FDA in June 2024[52] Results of Operations Operating expenses significantly increased, driven by higher R&D and G&A costs, leading to a widened net loss for the period Comparison of Operating Results (in thousands) | Expense Category | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Research and development | $26,944 | $10,457 | 158% | | General and administrative | $19,361 | $6,023 | 221% | | Total operating expenses | $48,343 | $17,092 | 183% | | Net loss | ($43,252) | ($16,831) | 157% | - The increase in R&D expense was driven by a $6.5 million rise in personnel costs, $6.6 million in NDA submission support costs, and $3.4 million in supply chain activities for commercial launch preparation[62] - The increase in G&A expense was driven by a $9.4 million rise in personnel costs (including non-cash stock-based compensation) and a $3.9 million increase in professional services and commercial launch preparation costs[63] Liquidity and Capital Resources The company maintains a strong liquidity position with substantial cash and marketable securities, bolstered by recent equity offerings - As of June 30, 2024, the company had $57.0 million in cash and cash equivalents, $209.1 million in current marketable securities, and $28.5 million in long-term marketable securities[66] - In May 2024, the company closed a public offering raising gross proceeds of $158.7 million[66] - In July 2024, the company entered into an Open Market Sale Agreement to sell up to $150.0 million of its common stock from time to time[46][66] Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($30,179) | ($12,294) | | Net cash used in investing activities | ($236,165) | $0 | | Net cash provided by financing activities | $153,687 | $17,060 | Quantitative and Qualitative Disclosures About Market Risk No material changes to the company's market risk exposure were reported for the six months ended June 30, 2024 - There have been no material changes to the company's market risk exposure during the first six months of 2024[72] Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[74] - There were no changes to the company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[75] PART II—OTHER INFORMATION Legal Proceedings The company does not anticipate any current legal proceedings to have a material adverse effect on its business - The company is not currently party to any litigation that it believes will have a material adverse effect on its business[76] Risk Factors No material changes to previously disclosed risk factors were reported - There have been no material changes from the risk factors disclosed in the company's most recent Form 10-K[77] Other Information and Exhibits This section covers standard disclosures, including no unregistered equity sales, social media use for disclosures, and a new lease agreement exhibit - The company reported no unregistered sales of equity securities or defaults upon senior securities[77][78] - The company uses social media platforms like Twitter (X) and LinkedIn for disclosures, and information posted there could be deemed material[79] - A new lease agreement dated June 13, 2024, is included as an exhibit to the filing[80]