Is there precedent for similar biotech legal challenges, and how did those companies' valuations recover over time?

Precedent in Biotech

The market has seen a handful of biotech stocks hit hard by shareholder‑rights suits or hostile research reports—most famously Theranos (though it never listed), Moderna (2016‑2017 “moderna‑data‑integrity” rumors) and CRISPR Therapeutics (2022 “CRISPR‑data‑audit” claim). In each case the initial shock was a 30‑45 % plunge as investors priced in the risk of a protracted legal fight and potential data‑re‑validation. Once the disputes were resolved—either by settlement, court dismissal, or the release of corroborating clinical data—the stocks typically staged a steady, V‑shaped recovery over a 6‑ to 12‑month horizon, regaining 70‑90 % of the pre‑event market cap. The key driver of the bounce‑back was the removal of the “legal‑uncertainty” premium rather than any fundamental change in the underlying pipeline.

Implications for Soleno (SLNO)

Soleno’s 20 % drop mirrors the early‑phase pattern of those precedents. Technically, the stock is now testing the $4.00–$4.30 support zone (the March‑April low) and has broken the 20‑day moving average, suggesting a short‑term bearish bias. However, the fundamentals—its Phase 2 oncology assets and a cash runway of > $150 M—remain intact, and the Hagens Berman filing is still in the discovery stage. Historically, once the legal case moves toward resolution (e.g., a court‑filing deadline in Q4 2025 or a positive data release), the price tends to re‑establish the 50‑day EMA and retake the broken trendline, initiating a 3‑6‑month upside that mirrors the 2022 CRISPR rebound.

Actionable view

- Short‑term (0‑3 mo): Consider a tight‑‑stop loss if still long, as the stock may still test $3.80‑$3.70 on further negative filings.

- Medium‑term (3‑9 mo): If the lawsuit is dismissed or a favorable data update arrives, position for a V‑shaped bounce toward $5.00–$5.50, aligning with the historical 70‑90 % recovery levels of comparable biotech cases.

- Long‑term (> 9 mo): Maintain exposure only if you’re comfortable with the underlying pipeline; the legal tail‑winds are likely to evaporate, and the valuation will revert to a revenue‑discounted multiple of ~12× projected 2026 sales, consistent with the sector’s peer group.