Applied Therapeutics, Inc.

Applied Therapeutics, Inc. is a clinical-stage biopharmaceutical company focused on developing novel product candidates against molecular targets for indications with high unmet medical needs. The company's core business model revolves around leveraging technological advances to design improved drugs, employing early use of biomarkers to confirm biological activity, and focusing on potentially accelerated regulatory pathways. The primary customer segments are patients suffering from rare metabolic diseases and diabetic complications, for which there are currently limited or no approved treatments. The company generates revenue from licensing intellectual property and providing research and development services, rather than product sales, as it currently has no approved products ¹.

The company's lead candidate, AT-007 (govorestat), is a novel central nervous system (CNS) penetrant aldose reductase inhibitor (ARI) being developed for rare metabolic diseases, including Galactosemia, SORD Deficiency, and PMM2-CDG. For Galactosemia, AT-007 has received orphan drug designation, rare pediatric disease designation, and Fast Track Designation from the FDA ². In February 2024, the FDA accepted a New Drug Application (NDA) for AT-007 for Classic Galactosemia, but on November 27, 2024, issued a Complete Response Letter citing deficiencies in the clinical application and failure to reach statistical significance on primary endpoints ³. The company subsequently withdrew a pending Marketing Authorization Application (MAA) to the European Medicines Agency (EMA) for AT-007 for Classic Galactosemia ⁴. For SORD Deficiency, AT-007 has received orphan status designation from both the FDA and EMA ⁵. A Phase 2/3 INSPIRE trial for SORD Deficiency concluded its double-blind placebo-controlled portion in July 2024, with patients transitioning to an open-label treatment phase ⁶. Preclinical studies for AT-007 in PMM2-CDG have shown increased phosphomannomutase 2 activity in patient fibroblasts, and the FDA has granted rare pediatric disease designation and orphan designation for this indication ⁷.

Another product candidate, AT-001 (caficrestat), is a novel ARI with broad systemic exposure and peripheral nerve permeability, previously developed for diabetic cardiomyopathy (DbCM). A Phase 1/2 clinical trial in approximately 120 patients with type 2 diabetes showed no drug-related adverse effects and demonstrated target engagement ⁸. A Phase 2/3 ARISE-HF study for DbCM reported topline results on January 4, 2024, showing AT-001 stabilized cardiac functional capacity, while the placebo group declined. In a pre-specified subgroup analysis of patients not concomitantly treated with SGLT2 or GLP-1 therapies, AT-001 showed a statistically significant difference in cardiac functional capacity improvement compared to placebo (p=0.040) ⁹. However, the company is currently not expending additional internal resources on AT-001 due to its focus on rare diseases ¹⁰. AT-003 is a novel ARI designed for diabetic retinopathy (DR), demonstrating strong retinal penetrance in preclinical studies. The company is also not expending additional internal resources on AT-003 due to its focus on rare diseases ¹¹. AT-104, a preclinical dual selective PI3k inhibitor, was discontinued due to regulatory changes, with all rights returned to Columbia University ¹².

For the fiscal year ended December 31, 2024, the company reported total revenue of $0.5 million ¹³, a decrease from $10.0 million in the prior year ¹⁴. This decline was primarily due to a $9.2 million decrease in license revenue, as no new license arrangements were executed in 2024, and a $0.3 million decrease in research and development services revenue ¹⁵. Gross profit is not explicitly stated, but total costs and expenses were $104.8 million ¹⁶. Operating loss was $104.3 million ¹⁷. Net loss for the year was $105.6 million ¹⁸, compared to $119.8 million in 2023 ¹⁹. Basic and diluted EPS was $(0.76) ²⁰. Cash and cash equivalents stood at $79.4 million as of December 31, 2024 ²¹. Total liabilities were $29.7 million ²², and warrant liabilities, classified as current, were $6.3 million ²³. The company had an accumulated deficit of $574.2 million as of December 31, 2024 ²⁴.

Year-over-year, total revenue decreased by $9.5 million, from $10.0 million in 2023 to $0.5 million in 2024 ²⁵. Research and development expenses decreased by $5.2 million, from $53.9 million in 2023 to $48.7 million in 2024 ²⁶. This was driven by a $12.0 million decrease in clinical and pre-clinical expense, mainly for AT-001, and a $1.3 million decrease in drug manufacturing and formulation costs, partially offset by a $4.3 million increase in stock-based compensation and a $3.6 million increase in regulatory and other expenses related to the Galactosemia study ²⁷. General and administrative expenses significantly increased by $35.4 million, from $20.6 million in 2023 to $56.0 million in 2024 ²⁸, primarily due to an $8.1 million increase in legal and professional fees, an $18.3 million increase in commercial expenses related to planned commercialization, and a $4.7 million increase in personnel expenses ²⁹. Net loss improved from $119.8 million in 2023 to $105.6 million in 2024, largely due to a substantial decrease in the change in fair value of warrant liabilities, which was $(4.8) million in 2024 compared to $(56.6) million in 2023 ³⁰.

Significant operational developments during the period include the FDA's Complete Response Letter for AT-007 in Classic Galactosemia and a Warning Letter related to the ACTION-Galactosemia Kids study in November 2024 ³¹. The company subsequently withdrew its MAA to the EMA for AT-007 for Classic Galactosemia ³². The double-blind placebo-controlled portion of the Phase 2/3 INSPIRE trial for SORD Deficiency concluded in July 2024 ³³. The company also entered into an Exclusive License and Supply Agreement with Advanz Pharma in January 2023 for commercialization of AT-007 in Europe, which included an upfront payment of EUR 10 million (approximately USD $10.7 million) and potential milestone payments totaling over EUR 130 million ³⁴. The company completed a private placement in March 2024, selling 12,285,714 common shares and 2,000,000 Pre-Funded Warrants, resulting in aggregate gross proceeds of approximately $100.0 million ³⁵.

The company expects to continue incurring significant expenses and increasing operating losses for the foreseeable future as it advances preclinical activities and clinical trials for its product candidates ³⁶. Expenses are anticipated to increase substantially as the company continues development for regulatory approval, initiates and completes future preclinical studies and clinical trials, seeks marketing approvals, establishes commercial infrastructure, discovers additional product candidates, builds its intellectual property portfolio, and hires additional personnel ³⁷. The company also expects to incur additional costs associated with operating as a public company, including legal, accounting, and investor relations expenses ³⁸.

A major growth area for the company is the continued development of AT-007 (govorestat) for rare metabolic diseases. Despite the Complete Response Letter from the FDA for Classic Galactosemia, the company is actively working to address the issues raised and is evaluating its development program for this indication ³⁹. For SORD Deficiency, the company is analyzing data from the Phase 2/3 INSPIRE trial and plans to meet with the FDA to discuss a potential NDA submission, including under the accelerated approval pathway ⁴⁰. The company also plans to initiate a clinical development program for AT-007 in PMM2-CDG, a rare pediatric disease, and intends to request a pre-IND meeting with the FDA to discuss this program ⁴¹. The partnership with Advanz Pharma for commercialization of AT-007 in Europe for Galactosemia and SORD Deficiency, with potential milestone payments totaling over EUR 130 million and royalties of 20% on net sales, represents a significant future revenue opportunity, contingent on marketing authorization ⁴².

The company's operational outlook includes potential moderate growth in its clinical development and operations teams to support additional clinical trials for SORD Deficiency, PMM2-CDG, and retinopathy ⁴³. A medical affairs team is also anticipated to support late-stage indications and commercialization preparations ⁴⁴. The company depends on third-party contract manufacturing organizations (CMOs) for raw materials, drug substance, and drug product for its preclinical research and clinical trials ⁴⁵. While the synthesis of drug substance for AT-007 and AT-001 is believed to be reliable and scalable, the company may identify a second drug product manufacturer in the future to add capacity and redundancy to its supply chain ⁴⁶.

Regarding capital allocation, the company expects to finance its cash needs through public or private equity or debt financings, third-party funding, marketing and distribution arrangements, collaborations, strategic alliances, and licensing arrangements ⁴⁷. In March 2024, the company completed a private placement, raising approximately $100.0 million in gross proceeds from the sale of common stock and pre-funded warrants ⁴⁸. In 2024, the company also received $12.4 million in net proceeds from the sale of 3,000,000 shares of common stock through the Leerink ATM Agreement ⁴⁹, and $9.0 million from the exercise of 9,025,000 common warrants ⁵⁰. The company is exploring other structured finance options, including PIPE, debt, convertible debt, and synthetic royalty financing, and is in dialogue with several potential partners regarding business development opportunities ⁵¹.

The company faces structural headwinds and execution risks, notably the Complete Response Letter from the FDA for AT-007 in Classic Galactosemia and a Warning Letter related to the ACTION-Galactosemia Kids study ⁵². These regulatory setbacks could impede current and future clinical trials or NDA submissions and necessitate additional, costly, and time-consuming clinical trials ⁵³. The company also withdrew its MAA to the EMA for AT-007 for Classic Galactosemia, indicating further delays for European market entry ⁵⁴. There is no guarantee that the FDA will agree with the company's strategy for SORD Deficiency, and additional preclinical or clinical trials may be required ⁵⁵. The company's ability to obtain additional financing is affected by the decrease in its common stock trading price and the regulatory setbacks, as well as overall macroeconomic trends ⁵⁶.

The company faces material risks including substantial operating losses and a "going concern" explanatory paragraph in its audit report, indicating a need for significant additional funding ⁵⁷. Regulatory risks are heightened by the FDA's Complete Response Letter for AT-007 in Classic Galactosemia and a Warning Letter related to the ACTION-Galactosemia Kids study, which could impede future clinical trials and NDA submissions, potentially requiring costly additional studies and delaying or preventing regulatory approval ⁵⁸. The company also identified a material weakness in its internal control over financial reporting as of December 31, 2024, related to deficiencies in information and communication processes, which could impair accurate and timely financial reporting ⁵⁹. Competition in the biopharmaceutical industry is intense, with larger companies possessing greater resources, and the company's product candidates may fail to achieve market acceptance even if approved ⁶⁰. Dependence on third-party contract manufacturers and CROs introduces risks of supply chain disruptions, non-compliance with cGMP/GCP, and data integrity issues, as evidenced by a clinical investigator receiving a warning letter from the FDA ⁶¹. Intellectual property risks include the potential for competitors to develop similar products if patent protection is insufficient or challenged, and the possibility of losing development and commercialization rights if license agreements are breached ⁶². Furthermore, the company is involved in securities-related class action and derivative litigation, which is costly and diverts management resources ⁶³. Macroeconomic factors, such as inflation, could increase labor and clinical trial costs, and changes in healthcare reform measures, including drug pricing policies and reimbursement limitations, could negatively impact future revenues ⁶⁴.

Management's overall tone emphasizes a unique and focused approach to drug development, leveraging technological advances and early use of biomarkers to confirm biological activity, with a focus on accelerated regulatory pathways to bring transformative therapies to market for diseases with high unmet medical need ⁶⁵. Despite the recent Complete Response Letter from the FDA for AT-007 in Classic Galactosemia and a Warning Letter related to the ACTION-Galactosemia Kids study, management is actively working to address the issues raised and is evaluating its development program for Classic Galactosemia and SORD Deficiency ⁶⁶. A key strategic priority is to continue advancing the development of its ARI product candidates, including AT-007 for SORD Deficiency and PMM2-CDG, and to seek strategic partnerships in other indications ⁶⁷. The company also aims to expand its pipeline to products targeting other molecules and pathways outside of AR, potentially through acquiring or in-licensing additional technologies from academic institutions ⁶⁸. Management acknowledges the need for substantial additional funding for ongoing operations and planned research and clinical development activities, and is exploring various financing options, including equity, debt, and strategic collaborations ⁶⁹.