Summary
Scorpion Capital published an extensive short report alleging that Soleno Therapeutics has perpetrated a "rare-disease price-gouging scheme" with VYKAT XR, a $500,000 per year treatment for Prader-Willi Syndrome hyperphagia that is merely a tablet version of a 50-year-old generic drug. The report claims the drug poses serious cardiac and diabetes risks, with children already being hospitalized for potential heart failure shortly after starting the treatment.
Who is Soleno Therapeutics
Soleno Therapeutics is a biotech company focused on developing treatments for rare diseases, with VYKAT XR (diazoxide choline) as its flagship product approved by the FDA in March 2025 for treating hyperphagia in Prader-Willi Syndrome (PWS) patients aged 4 and older. The company's only commercial drug is an extended-release tablet formulation of diazoxide, a compound that has been used for 50 years in liquid form to treat hyperinsulinemia in hospital settings. Soleno positions itself as addressing the unmet medical need in PWS, a rare genetic disorder characterized by insatiable hunger (hyperphagia) that can lead to life-threatening obesity. The company went from penny stock status to significant market capitalization following FDA approval.
Key Points from Report
Safety Crisis and Hospitalizations
- Multiple children have been hospitalized for potential heart failure and pulmonary edema within weeks of starting VYKAT XR, with reports emerging from the largest Facebook group dedicated to the drug
- Reports include an 11-year-old who spent 7 weeks in the hospital and a 25-year-old who was admitted for 4 days requiring oxygen after being on the drug for 2 months
- Parents are reporting extreme fluid retention, with children gaining 10-15 pounds of fluid within weeks and being unable to walk or put on shoes due to swelling
- Blood sugar spikes to diabetic levels are being reported, with one 5-year-old experiencing glucose levels of 256 mg/dL and symptoms consistent with diabetic ketoacidosis
Trial Investigator Rejection and Skepticism
- Scorpion interviewed 8 trial investigators who expressed broad skepticism, with many stating they have no plans to prescribe the drug and advising other physicians to avoid it
- Trial investigators reported that "couple of patients hospitalized with heart failure" during trials, but these events allegedly were not attributed to the drug in published papers
- Investigators indicated "pressure from the highest levels to conceal toxicity and serious adverse events" and that there was "atmosphere at the company" to "downplay the adverse effects"
- Multiple investigators reported massive patient discontinuation rates from their trial sites, with only 1-2 patients remaining on drug out of 10+ enrollees
Questionable Clinical Trial Data and Conduct
- The pivotal withdrawal study that led to FDA approval enrolled 77 patients but remains unpublished, which Scorpion calls "highly unusual for an FDA-approved drug and a massive red flag"
- Ex-employees alleged that trial enrollment was heavily weighted to one investigator (Jennifer Miller) who "really skewed the data" and that employees were "really skeptical" of her conduct
- Scorpion identified two different versions of HbA1c data from the same study with completely different values, concluding it represents "fabricated data – a sloppy, amateur cut-and-paste job"
- The trials were reportedly "functionally unblinded" due to obvious side effects like hair growth and edema, plus the drug tablets had a distinct smell different from placebo
Mechanism of Action Concerns and Drug Substitution Risk
- VYKAT XR is merely an extended-release tablet version of diazoxide, which has been available as a generic suspension for 50 years at a fraction of the cost
- The report argues that diazoxide cannot cross the blood-brain barrier due to being "highly polar," "poorly lipophilic," and ">90% bound to albumin," making the claimed CNS mechanism scientifically unfounded
- Multiple trial investigators stated they would prefer to prescribe generic diazoxide suspension instead, with one saying "everybody can take that, whereas not everybody can swallow a pill"
- The report claims that insulin suppression from diazoxide will actually increase hunger rather than decrease it, contradicting the drug's intended mechanism
Activ8 Analysis
The Scorpion Capital report presents deeply concerning allegations about both the safety profile and clinical development process of VYKAT XR. The documented reports of pediatric hospitalizations for cardiac events so soon after commercial launch, combined with the systematic criticism from trial investigators who participated in the drug's development, suggest significant execution and safety challenges that warrant careful consideration. The apparent disconnect between the company's clinical trial results and the real-world experience reported by both physicians and patients raises questions about the robustness of the underlying data.
The commercial and competitive positioning also faces substantial headwinds, as the drug represents an expensive reformulation of a decades-old generic compound that appears readily substitutable by existing alternatives. The high discontinuation rates reported across multiple trial sites, combined with lukewarm physician enthusiasm and challenging payer dynamics, suggest a difficult commercial trajectory ahead. Investors should carefully evaluate these operational, safety, and competitive dynamics when assessing the company's long-term viability, particularly given the concentrated nature of the rare disease market and the critical importance of physician confidence in specialty therapeutic adoption.