10-K: Applied Therapeutics Faces Setbacks with Galactosemia Drug, Shifts Focus to SORD Deficiency

Applied Therapeutics receives a Complete Response Letter from the FDA for its Galactosemia drug, prompting a strategic shift towards Sorbitol Dehydrogenase (SORD) Deficiency treatment.

Summary

• Applied Therapeutics, a clinical-stage biopharmaceutical company, is developing novel product candidates for unmet medical needs.
• The company's lead candidate, AT-007 (govorestat), targets rare metabolic diseases like Galactosemia and SORD Deficiency.
• In February 2024, the FDA accepted the New Drug Application (NDA) for AT-007 for Classic Galactosemia, but issued a Complete Response Letter in November 2024, citing deficiencies in the clinical application.
• The FDA also issued a warning letter related to the Phase 2/3 ACTION-Galactosemia Kids study.
• Following the Complete Response Letter, Applied Therapeutics withdrew its Marketing Authorization Application (MAA) to the European Medicines Agency (EMA) for AT-007 for Classic Galactosemia.
• The company is analyzing data from the Phase 2/3 INSPIRE trial for SORD Deficiency and plans to discuss potential regulatory submission with the FDA.
• Applied Therapeutics plans to initiate a clinical development program for AT-007 in PMM2-CDG, another rare pediatric disease.
• A partnership with Advanz Pharma exists for commercialization of AT-007 in Europe, potentially yielding over $130 million in milestone payments and 20% royalties on net sales.
• Topline results from the ARISE-HF study of AT-001 in diabetic cardiomyopathy (DbCM) showed a trend in stabilizing cardiac function, but the difference between active and placebo groups was not statistically significant.
• The company is currently not expending additional internal resources on AT-001 or AT-003 due to its focus on rare diseases.
• Applied Therapeutics reported a net loss of $105.6 million for the year ended December 31, 2024, and had cash and cash equivalents of $79.4 million.
• The company's independent registered public accounting firm included a going concern explanatory paragraph in its report.

Sentiment

Score: 3

Explanation: The document presents a mixed picture, with positive preclinical data and partnerships offset by regulatory setbacks, financial losses, and a going concern warning. The overall sentiment is negative due to the significant challenges the company faces.

Positives

• AT-007 reduced blood sorbitol levels by approximately 66% from baseline through 30 days of treatment in a pilot study of SORD Deficiency patients.
• A partnership with Advanz Pharma exists for commercialization of AT-007 in Europe, potentially yielding over $130 million in milestone payments and 20% royalties on net sales.
• Topline results from the ARISE-HF study of AT-001 in DbCM showed a trend in stabilizing cardiac function, but the difference between active and placebo groups was not statistically significant.
• The company plans to meet with the FDA to discuss whether an NDA can be submitted based on the current data package and/or potential additional supporting data for SORD Deficiency.

Negatives

• Applied Therapeutics received a Complete Response Letter from the FDA for its NDA for AT-007 in Classic Galactosemia.
• The FDA also issued a warning letter related to the Phase 2/3 ACTION-Galactosemia Kids study.
• The company withdrew its MAA to the EMA for AT-007 in Classic Galactosemia.
• The company reported a net loss of $105.6 million for the year ended December 31, 2024, and had cash and cash equivalents of $79.4 million.
• The company's independent registered public accounting firm included a going concern explanatory paragraph in its report.
• The company identified a material weakness in its internal control over financial reporting as of December 31, 2024.

Risks

• The company has incurred significant operating losses and may never achieve or maintain profitability.
• The company needs substantial funding to operate, and failure to secure it may harm its development programs.
• The Warning Letter from the FDA could impede current and future clinical trials or NDA submissions.
• The company's success is substantially dependent on the successful clinical development, regulatory approval, and commercialization of its product candidates.
• Clinical drug development involves a lengthy and expensive process, and the development of additional product candidates is risky and uncertain.
• The company may be unable to obtain or maintain regulatory approvals, designations, or accelerated pathways for its product candidates.
• The company's product candidates may cause undesirable side effects, affecting regulatory approval and commercial potential.
• The company may face substantial competition.
• The company may face risks related to strategic collaborations to develop its product candidates.
• The company may be adversely affected by product liability lawsuits.
• The company is subject to healthcare laws and regulations, which are subject to change and carry substantial penalties for noncompliance.
• The company relies on third parties to conduct its preclinical studies and clinical trials in an unsatisfactory manner.
• The company intends to rely on third parties to produce supplies of its product candidates.
• Breaches of the company's license agreements may result in adverse effects to its ability to continue the development and commercialization of its product candidates.
• Insufficient patent protection could let competitors develop similar products.
• The market price of the company's common stock is volatile and has fluctuated substantially, which could result in substantial losses for purchasers of its common stock.
• Failure to regain compliance with the continued listing requirements of Nasdaq could result in the company's common stock being delisted and the price of its common stock could be negatively impacted.

Future Outlook

The company expects to continue to incur significant expenses and increasing operating losses for the foreseeable future in connection with its ongoing activities. The company is continuing to analyze the data from the Phase 2/3 INSPIRE trial and the extent to which these data may support a potential submission for regulatory approval. Following this analysis, the company plans to meet with the FDA to discuss whether an NDA can be submitted based on the current data package and/or potential additional supporting data.

Industry Context

The biopharmaceutical industry is characterized by rapidly advancing technologies, intense competition, and a strong emphasis on proprietary products. The company faces competition from pharmaceutical and biotechnology companies, academic institutions, and governmental agencies.

Comparison to Industry Standards

• The document mentions Pfizer's development of zopolrestat (an ARI) for DbCM, which was discontinued due to liver toxicity, highlighting the challenges in developing ARIs.
• The document references anti-VEGF therapies like Lucentis and Eylea for diabetic retinopathy, which represent approximately 20% of the larger DR population, indicating the existing market for DR treatments.
• The document mentions Glycomine, Inc., which received an FDA Fast Track Designation for its product candidate, a non-AR treatment for PMM2-CDG, indicating other companies are also developing therapies for this disease.

Management Changes

Legal Proceedings

• A putative class action lawsuit was filed against the Company and certain current and former Company officers and directors on December 17, 2024, in the United States District Court for the Southern District of New York ( Alexandru v. Applied Therapeutics, Inc., et al. , No. 1:24-cv-09715).
• Another purported stockholder filed a putative class action lawsuit against the Company and a former Company officer and director in the United States District Court for the Southern District of New York ( Ikram v. Applied Therapeutics, Inc., et al. , No. 1:24-cv-09973).
• Certain of our current and former officers and directors were named as defendants in a shareholder derivative action filed in the United States District Court for the Southern District of New York ( Hassine v. Shendelman, et al., No. 1:25-cv-00935).

Related Party Transactions

• During the years ended December 31, 2024 and 2023, the Company made payments to Alexandria LaunchLabs of approximately $ 0.1 million under the LaunchLabs Agreement, which was recognized in research and development expenses.
• A shareholder and former member of the Companys board of directors is the founder and executive chairman of Alexandria Real Estate Equities, Inc.

Stakeholder Impact

• Shareholders: The Complete Response Letter and financial losses may negatively impact shareholder value.
• Employees: Recent leadership changes and potential cost-cutting measures may create uncertainty for employees.
• Patients: Delays in regulatory approval may delay access to potential treatments for Galactosemia and other diseases.
• Partners: The Complete Response Letter may impact the Advanz Pharma partnership and future collaborations.

Next Steps

• The company is actively working to address the issues raised in the Complete Response Letter and Warning Letter.
• The company is continuing to analyze the data from the Phase 2/3 INSPIRE trial and plans to discuss potential regulatory submission with the FDA for SORD Deficiency.
• The company plans to request a pre-IND meeting with the FDA to discuss the clinical development program for AT-007 in PMM2-CDG.

Key Dates

Keywords

Galactosemia, SORD Deficiency, AT-007, Applied Therapeutics, FDA, Clinical Trials, Regulatory Approval, Biopharmaceutical, Rare Diseases, AT-001