Soleno Therapeutics, Inc. [SLNO] Securities Class Action Lawsuit Update

• Case Name: City of Pontiac Police and Fire Retirement System v. Soleno Therapeutics, Inc.
• Case No.: 3:26-cv-01979
• Jurisdiction: U.S. District Court, Northern District of California, San Francisco Division
• Filed on: March 6, 2026
• Class Period: March 26, 2025 – November 4, 2025, inclusive

Introduction

Soleno Therapeutics (NASDAQ: SLNO) built its story around a breakthrough drug for a devastating rare disease. Then the narrative shifted.

A securities class action lawsuit has been filed against Soleno Therapeutics, Inc., alleging the company misled investors about the safety profile and commercial viability of its flagship drug, VYKAT XR (formerly DCCR), a treatment for hyperphagia in individuals with Prader-Willi syndrome.

The lawsuit, filed in the U.S. District Court for the Northern District of California, claims that between March 26, 2025 and November 4, 2025, Soleno and several senior executives made materially misleading statements about the drug’s safety and clinical evidence. When reports of serious adverse events and physician skepticism emerged, the stock price fell sharply, triggering investor losses.

Now the case moves forward as investors attempt to determine whether Soleno’s rise and fall was driven by misleading disclosures.

“Most SLNO shareholders never file or join the class action, which means they miss out on potential recovery funds,” said Attorney Joseph Levi.

Backdrop and Business Context

Soleno Therapeutics is a biotechnology company focused on developing therapies for rare diseases. Its core asset is diazoxide choline extended-release tablets, branded as VYKAT XR, designed to treat hyperphagia, an uncontrollable hunger, in patients with Prader-Willi syndrome (PWS).

PWS is a rare genetic disorder caused by the loss of gene function on chromosome 15. Patients often experience persistent hunger beginning in childhood, which can lead to severe obesity, metabolic complications, and increased mortality risk. Before VYKAT XR, there were no FDA-approved therapies specifically targeting hyperphagia in PWS patients. With an estimated global patient population of 300,000 to 400,000 individuals, the drug represented a potentially significant commercial opportunity.

Soleno’s modern corporate identity emerged after its 2017 merger with Essentialis, which brought the DCCR compound into its pipeline. CEO Anish Bhatnagar led the company’s transition toward a single-asset strategy centered around this therapy. After years of clinical trials and regulatory negotiations, the FDA approved the drug on March 26, 2025, an event that transformed the company overnight.

But approval was only the beginning of the story.

Promises Made vs. Reality

During the class period, Soleno executives repeatedly emphasized the strength of clinical trial data supporting the drug. In announcing FDA approval, the company said the treatment was supported by “an adequate and well-controlled study” and demonstrated statistically significant improvements in hyperphagia scores during a randomized withdrawal trial.

Executives reinforced the narrative during investor presentations and earnings calls. CEO Anish Bhatnagar described the therapy as having a “favorable safety and tolerability profile,” while CFO James Mackaness highlighted statistically significant trial results as the basis for regulatory approval.

But the lawsuit alleges a different reality. According to the complaint, Soleno’s clinical program allegedly downplayed significant safety risks associated with the drug, including fluid retention, metabolic complications, and potential cardiovascular issues. These risks were allegedly known internally but not adequately disclosed to investors. The complaint further claims that these undisclosed safety concerns threatened the drug’s commercial success by increasing the likelihood of patient discontinuation, physician reluctance to prescribe, regulatory scrutiny, and reputational damage.

If proven, such omissions could constitute violations of federal securities laws.

Timeline of Alleged Misconduct and Disclosures

March 26, 2025 —FDA Approval

Soleno announces FDA approval of VYKAT XR for treating hyperphagia in PWS patients. The approval is framed as a major milestone supported by Phase 3 clinical trial data.

July 2025 — Secondary Offering

The company raises roughly $230 million through a secondary stock offering, selling shares at $85 per share while continuing to emphasize the drug’s safety and efficacy profile.

August 15, 2025 — Scorpion Capital Report

A short-seller report from Scorpion Capital publishes a 415-page critique alleging major problems with the drug’s clinical trials and safety profile. The report claims the drug could pose risks including diabetes development, pulmonary edema, congestive heart failure, and widespread patient discontinuation.

The stock falls nearly 12% over two trading days.

September 10, 2025 — Patient Death Reported

Soleno files an SEC Form 8-K disclosing that a patient who had taken the drug had died. The company states the treating physician did not attribute the death to the drug.

Shares drop approximately 19% over two days.

November 4, 2025 — Launch Disruption Revealed

Soleno reports that the controversy surrounding the Scorpion report disrupted the drug’s launch and increased patient discontinuation. Shares fall roughly 27% in a single trading day.

Investor Harm and Market Reaction

At the height of investor enthusiasm, Soleno shares traded above $90 during the class period.

Following the sequence of disclosures and controversy, the stock plunged below $45, a decline exceeding 50%. The complaint alleges these price drops erased hundreds of millions of dollars in shareholder value. Notably, the stock price never recovered to pre-controversy levels, suggesting investors viewed the safety concerns as credible risks to the drug’s future.

For biotech companies built around a single product, such shifts in sentiment can be devastating.

Litigation and Procedural Posture

The lawsuit was filed in the U.S. District Court for the Northern District of California. Defendants include Soleno Therapeutics, Inc., CEO Anish Bhatnagar, CFO James Mackaness, and Chief Commercial Officer Meredith Manning. The complaint alleges violations of Section 10(b) of the Securities Exchange Act, Rule 10b-5, and Section 20(a) control-person liability.

The plaintiff is the City of Pontiac Police and Fire Retirement System, acting on behalf of investors who purchased Soleno stock during the class period.

Shareholder Sentiment

Investor sentiment toward Soleno appeared to deteriorate as the market focused more closely on safety questions surrounding VYKAT XR. The complaint points to social-media posts and screenshots describing edema, hospitalization, and discontinuation after treatment, and it alleges that those concerns coincided with sharp stock-price declines following the August 15, September 10, and November 4 disclosures. In that sense, the tone of public discussion described in the complaint was directionally consistent with the case theory: once safety, discontinuation, and launch-friction concerns moved to the forefront, sentiment weakened materially.

Analyst Commentary

Wall Street analysts responded positively when VYKAT XR won FDA approval. Reuters reported that analysts viewed the approval as materially expanding treatment options for patients with Prader-Willi syndrome, and one analyst described it as a launch investors would want to own. Reuters also reported that analysts noted the drug’s clean label and the absence of harsh FDA safety warnings.

After Scorpion Capital disclosed its short position in August 2025, Reuters reported the allegations but also noted that it could not independently verify them. In the same coverage, analysts quoted by Reuters said doctor feedback on VYKAT remained positive and that prior checks had not revealed safety concerns.

By November 2025, however, Soleno itself disclosed that the short-seller report had disrupted the launch trajectory, with fewer start forms and increased discontinuations. That later company disclosure is directionally consistent with the complaint’s theory that the controversy impaired commercial momentum, even though the earlier Reuters analyst commentary was more favorable than the current draft suggests.

SEC Filings & Risk Factors

Soleno’s SEC filings emphasized the rigorous nature of its clinical program and the FDA approval process.

In quarterly filings, the company stated that drug approval required “substantial evidence from well-controlled clinical trials” demonstrating safety and effectiveness. The filings also discussed potential risks typical for biotech companies, including regulatory uncertainty, clinical trial outcomes, and commercial adoption challenges. However, the lawsuit alleges that the company failed to fully disclose specific safety risks associated with DCCR observed during clinical development.

If the plaintiffs can show those risks were known internally and omitted from public disclosures, the case could hinge on the legal concept of scienter, which is intent or recklessness in misleading investors.

Conclusion: Implications for Investors

The Soleno Therapeutics lawsuit illustrates the fragile line between scientific optimism and investor disclosure obligations.

Biotech companies often live or die by a single drug candidate. When that candidate shows promise, the market rewards the story quickly. But when safety concerns emerge, especially after regulatory approval, the consequences can be swift and severe.

For investors, the case highlights several recurring red flags like a reliance on a single product, heavy promotional narratives around clinical data, insider confidence preceding capital raises, and sudden safety controversies after launch.

The courts will determine whether Soleno crossed the legal line. But the broader lesson is already visible.

In biotech investing, the science tells the story, until it doesn’t.

How to Join the Soleno Therapeutics (SLNO) Class Action

• Confirm you purchased SLNO shares during the relevant period
• Review eligibility details
• Click here to check eligibility

Disclaimer: This shareholder alert is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for personalized guidance. No specific outcomes are guaranteed.