Stifel reiterates Buy rating on Soleno Therapeutics stock at $118 target

Stifel reiterated a Buy rating on Soleno Therapeutics (SLNO) with a $118 price target after competitor Acadia Pharmaceuticals' (ACAD) Prader-Willi syndrome drug (ACP-101) failed its Phase 3 trial, removing a significant competitive overhang for Soleno's Vykat and clearing prior share pressure. This development positions SLNO for sustained growth and potential European expansion, according to Stifel. While ACAD discontinued ACP-101 for this indication, it maintains strong financials, with UBS upholding a Buy rating and Stifel reiterating a Hold, acknowledging its core business stability and other pipeline assets.

Analysis

The failure of Acadia Pharmaceuticals' (ACAD) ACP-101 Phase 3 trial for Prader-Willi syndrome (PWS) has significantly altered the competitive landscape, creating a major tailwind for Soleno Therapeutics (SLNO). Stifel notes that this event removes a 'significant competitive overhang' for Soleno's PWS drug, Vykat, and has reiterated its Buy rating on SLNO with a $118.00 price target. The firm posits that recent pressure on SLNO shares was driven by headline risk and M&A uncertainty rather than fundamental concerns over Vykat's peak sales potential. This development, coupled with expectations for strong third-quarter earnings and potential European market expansion next year, positions Soleno for what Stifel terms 'significant/sustained growth,' despite some lingering questions on drug durability and safety. Conversely, for Acadia, the discontinuation of ACP-101 for PWS is a clear setback. However, analyst sentiment is not uniformly negative; the company maintains a strong financial position with $1.02B in revenue. UBS has maintained its Buy rating and a $39 price target, citing an appealing valuation, while Stifel reiterated a Hold, pointing to a stabilizing core business and the potential of another pipeline asset, ACP-204, for Alzheimer’s disease psychosis.

Key Decisions for Investors

• Investors with a bullish thesis on Soleno Therapeutics may find it validated by the removal of a primary competitor, potentially justifying an increased position ahead of anticipated Q3 earnings and European expansion catalysts.
• For Acadia Pharmaceuticals, the failure of ACP-101 requires a re-evaluation of its pipeline risk, shifting focus to the performance of its core commercial business and the clinical progression of other assets like ACP-204.
• The developments highlight the binary nature of biotech investments; monitor the competitive landscape closely, as a competitor's clinical failure can materially de-risk a company's lead asset and create a distinct investment opportunity, as demonstrated by the improved outlook for Soleno.