Soleno Therapeutics, Inc. SLNO will provide updates on its pipeline candidates when it releases second-quarter 2020 results.

The company has a mixed track record, delivering an earnings beat in one of the trailing four quarters while missing in the remaining three. The four-quarter earnings surprise was 11.84%, on average. In the last reported quarter, Soleno came up with a positive earnings surprise of 40.91%.

Shares of Soleno have decreased 37.7% in the year so far compared with the industry’s decline of 7.7%.

Let’s see how things are shaping up for the quarter to be reported.

Factors at Play

Soleno does not have any approved drug in its portfolio. In the absence of any marketed drug, the focus of the investors inthe second-quarter conference call will be on updates fromits pipeline.

The company’s lead candidate is Diazoxide Choline Controlled-Release tablet, (DCCR) a once-daily oral tablet being evaluated in late-stage studies for the treatment of Prader-Willi Syndrome (PWS). The symptom of PWS disorder is hyperphagia, a chronic feeling of insatiable hunger that can cause life-threatening co-morbidities, including obesity. It is a condition for which no treatments are available. DCCR is currently being evaluated in a phase III DESTINY PWS (C601) study.

The company reported top-line data from the DESTINY PWS study in June 2020. The study did not meet the primary endpoint of change from baseline in hyperphagia. However, the study showed significant improvements in the prespecified subgroup of patients with severe hyperphagia. In fact, significant changes were also seen in two of the three key secondary endpoints, including total body fat mass. We expect the company to provide updates on the study in the second-quarter call.

In June 2020, the company also provided interim data from the C602 long-term safety extension study of DCCR in PWS patients who completed the C60 study and morethan 90% of them are continuing to be treated. The study showed further reductions in hyperphagia of 48% after six months of DCCR treatment.

Study visits in C601 and C602trialsconducted after approximately mid-March were affected by the COVID-19 pandemic. Certain evaluations could have been conducted in a different manner, as there have been certain changes in the conduct of Soleno’s clinical studies, depending on the institution-, state- and country-specific restrictions, such as stay-at-home requirements.Some evaluations, such as dual-energy x-ray absorptiometry, (DEXA/DXA) scans, were not conducted in most cases post-mid-March. A DEXA scan is a high-precision type of X-ray that measures bone mineral density and bone loss.

The company should discuss the impact of COVID-19 on these studies during the second quarter.

Research and development expenses are also likely to have increased in the second quarter due to the ongoing clinical program

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Soleno this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here as you will see below.

Earnings ESP: Soleno has an Earnings ESP of 0.00% as both the Zacks Consensus Estimate and the Most Accurate Estimate are pegged at a loss of 20 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks That Warrant a Look

Here are some biotech stocks with the right mix of elements to beat on earnings this time around:

Alkermes Plc. ALKS has an Earnings ESP of +362.51% and a Zacks Rank #3. The company is scheduled to release second-quarter 2020 results on Jul 29.

bluebird bio Inc. BLUE has an Earnings ESP of +69.18% and a Zacks Rank #3. 

ACADIA Pharmaceuticals, Inc. ACAD has an Earnings ESP of +8.12% and a Zacks Rank of 3. The company is scheduled to release second-quarter 2020 results on Aug 5.

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