Soleno Therapeutics (SLNO): Examining Valuation in Light of Legal Scrutiny Over Prader-Willi Drug Claims

Soleno Therapeutics (SLNO) shares have come under scrutiny after Rosen Law Firm launched a class action investigation related to claims about its Prader-Willi syndrome therapy, VYKAT XR. Investor focus has shifted as concerns emerged regarding the treatment's safety and ongoing market access.

See our latest analysis for Soleno Therapeutics.

After a rocky few months shaped by both encouraging early sales for VYKAT XR and ongoing legal scrutiny, Soleno’s share price shows just how sensitive the market is to shifting risk narratives. Although the stock pulled back 24% over the past quarter, its roughly 46% year-to-date gain and a three-year total shareholder return that’s off the charts at over 5,200% suggest long-term momentum may still be in play, even as near-term sentiment remains cautious.

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Yet with shares trading at a discount to analyst targets and commercial momentum building, the key question for investors is whether Soleno is still undervalued, or if the market has already priced in next year’s growth.

Price-to-Book Ratio of 14.8x: Is it justified?

Soleno Therapeutics trades at a hefty price-to-book ratio of 14.8x, placing it well above both its biotech industry peers and wider sector averages. At a last close of $66.90, this elevated multiple stands out in the market and signals that investors are pricing in substantial growth potential or unique company advantages.

The price-to-book ratio compares a company's market value with its book value, giving insight into how much shareholders are paying for net assets. In fast-moving biotech, high ratios can signal investor optimism about future breakthroughs or concern about negative earnings. For Soleno, the currently unprofitable status and heavy losses make this ratio especially relevant for understanding speculative sentiment.

Compared with the US Biotechs industry average of just 2.6x and peer average of 9.3x, Soleno's price-to-book multiple is expensive by any measure. This premium suggests the market is expecting significant future growth or may be overvaluing recent commercialization milestones, especially with no fair ratio benchmark available to offer a potential sanity check.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-Book Ratio of 14.8x (OVERVALUED)

However, risks remain if ongoing legal scrutiny intensifies or if commercial momentum stalls. Either of these factors could quickly shift investor sentiment on Soleno.

Find out about the key risks to this Soleno Therapeutics narrative.

Another View: SWS DCF Model Suggests Deep Undervaluation

While the market is clearly placing a premium on Soleno Therapeutics based on its price-to-book ratio, our DCF model tells a dramatically different story. According to this approach, Soleno is trading at almost 86% below estimated fair value, which hints at significant upside that the market may be overlooking.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Soleno Therapeutics for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Soleno Therapeutics Narrative

If you see the numbers differently or want to approach the data from your own angle, it only takes a few minutes to craft your own perspective. Do it your way

A great starting point for your Soleno Therapeutics research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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