Business Overview and History
Applied Therapeutics was founded in 2016 with the vision of addressing unmet medical needs in the rare disease landscape. The company's initial focus has been on developing small-molecule inhibitors targeting the aldose reductase (AR) enzyme, which plays a crucial role in the pathogenesis of various metabolic and neurological disorders.
Since its inception, Applied Therapeutics has been primarily focused on developing its product candidates, organizing and staffing the company, business planning, raising capital, establishing its intellectual property portfolio, and conducting clinical trials. The company was incorporated in Delaware in January 2016 and is headquartered in New York, New York.
In 2016, Applied Therapeutics entered into a critical license agreement with Columbia University, obtaining an exclusive royalty-bearing license to certain patents and non-exclusive rights to know-how related to developing compounds, including the company's lead product candidates AT-007, AT-001, and AT-003. This milestone was instrumental in establishing the company's intellectual property position.
Over the years, Applied Therapeutics has faced challenges in progressing its product candidates through clinical development, navigating the lengthy and expensive clinical trial process to demonstrate the safety and efficacy of its drugs. The company successfully completed preclinical studies and early-stage clinical trials for AT-007, AT-001, and AT-003. However, it encountered delays in its clinical programs due to factors outside of its control, such as the COVID-19 pandemic, which disrupted enrollment and operations.
Despite these challenges, Applied Therapeutics has successfully raised significant capital through various means, including private placements, public offerings, and other financing activities. Notable fundraising events include a $27.5 million private placement in April 2023 and a $92.3 million private placement in March 2024, which have been crucial in supporting the company's ongoing research and development efforts.
The company's lead product candidate, AT-007 (also known as govorestat), is being developed for the treatment of Galactosemia, a rare inherited metabolic disorder caused by the inability to metabolize the sugar galactose. In clinical trials, AT-007 has demonstrated the ability to significantly reduce plasma galactitol levels, a toxic metabolite of galactose that is a key driver of the disease's clinical manifestations. Treatment with AT-007 has also shown improvements in clinical outcome measures such as activities of daily living, behavioral symptoms, cognition, fine motor skills, and tremor in children with Galactosemia.
In addition to Galactosemia, Applied Therapeutics is also exploring the potential of AT-007 in other rare diseases, such as Sorbitol Dehydrogenase (SORD) Deficiency and PMM2-CDG, highlighting the versatility of the company's AR-inhibitor platform. For SORD Deficiency, preclinical studies have shown that treatment with AT-007 can significantly reduce sorbitol levels in patient-derived cell lines and prevent disease phenotypes in an animal model of the condition.
The company's second major product candidate, AT-001 (also known as caficrestat), is being developed for the treatment of Diabetic Cardiomyopathy (DbCM), a fatal fibrosis of the heart that often leads to heart failure in patients with diabetes. In a recent Phase 3 clinical trial, AT-001 demonstrated a strong trend in stabilizing cardiac functional capacity, suggesting its potential to address this unmet medical need.
The third product candidate, AT-003, is designed to penetrate the retina when administered orally, for the treatment of diabetic retinopathy. The company continues to advance preclinical development of AT-003.
Financial Overview
As a clinical-stage biopharmaceutical company, Applied Therapeutics has not yet generated significant revenue from product sales. The company's financial performance has been primarily driven by its ability to secure funding through various means, including equity and debt financing, as well as strategic partnerships.
For the fiscal year ended December 31, 2023, Applied Therapeutics reported annual revenue of $10 million and a net loss of $119.8 million. The company's annual operating cash flow and free cash flow were both -$55.2 million. As of December 31, 2023, the company's cash and cash equivalents stood at $49.9 million.
For the most recent quarter ended September 30, 2024, Applied Therapeutics reported quarterly revenue of $122,000, representing a 100% year-over-year increase. This increase was driven by recognition of deferred revenue related to the company's partnership with Advanz Pharma. The quarterly net loss was $68.6 million. As of September 30, 2024, the company had cash and cash equivalents of $98.9 million.
In March 2024, the company completed a private placement, raising $92.3 million in gross proceeds, which is expected to further strengthen its financial position and support the advancement of its pipeline. Additionally, the company raised $49.3 million in proceeds from an at-the-market equity offering program.
Liquidity
Applied Therapeutics' liquidity position has been bolstered by its recent fundraising activities, most notably the $92.3 million private placement in March 2024. This influx of capital is critical for the company's ongoing operations and the advancement of its clinical programs. The company's ability to secure funding in challenging market conditions demonstrates investor confidence in its potential and strategy.
As of September 30, 2024, Applied Therapeutics had a debt-to-equity ratio of 0.03, indicating a low level of debt relative to equity. The company's current ratio and quick ratio were both 1.06, suggesting that it has sufficient short-term assets to cover its short-term liabilities.
The company believes its current cash position, along with expected milestone payments from its licensing agreement with Advanz Pharma for AT-007 in Europe, will fund its operations into 2026 and potentially beyond, depending on the timing of regulatory approvals and commercial launch of its product candidates.
Regulatory Setbacks and the Path Forward
Despite the promising progress of its lead candidates, Applied Therapeutics has faced significant regulatory challenges. In December 2024, the company received a Complete Response Letter (CRL) from the U.S. Food and Drug Administration (FDA) regarding its New Drug Application (NDA) for AT-007 in the treatment of Galactosemia. The FDA cited issues with the clinical data, creating uncertainty around the regulatory path forward for the drug in this indication.
The CRL was a major setback for the company, leading to a significant decline in its stock price. However, Applied Therapeutics remains committed to addressing the FDA's concerns and exploring options to potentially resubmit the NDA or appeal the decision.
In the meantime, the company continues to advance its pipeline, with a focus on its SORD Deficiency program. In February 2024, the company reported positive interim results from the ongoing Phase 3 INSPIRE trial, which demonstrated a statistically significant correlation between reductions in sorbitol levels and improvements in clinical outcome measures.
The company plans to submit an NDA for AT-007 in the treatment of SORD Deficiency in the first quarter of 2025, potentially providing a path to market for this rare disease indication. Additionally, the company is exploring the potential of AT-007 in other rare diseases, such as PMM2-CDG, further diversifying its pipeline and mitigating the risk associated with the Galactosemia setback.
Competitive Landscape and Risks
The rare disease drug development landscape is highly competitive, with numerous biopharmaceutical companies vying to bring new therapies to market. Applied Therapeutics faces competition from both large pharmaceutical companies and specialized rare disease-focused players, each with their own innovative approaches.
Furthermore, the company's success is heavily dependent on the successful development and regulatory approval of its product candidates. Delays or setbacks in the clinical trial process, as seen with the Galactosemia CRL, can have a significant impact on the company's financial performance and investor sentiment.
Additionally, the rare disease market presents its own set of challenges, such as limited patient populations, the need for specialized infrastructure and expertise, and potential reimbursement hurdles. Applied Therapeutics must navigate these complexities to ensure the long-term viability of its rare disease-focused business model.
Industry Trends and Market Outlook
The rare disease drug market, which includes Applied Therapeutics' focus areas of Galactosemia and SORD deficiency, is expected to grow at a compound annual growth rate (CAGR) of approximately 11.5% from 2023 to 2028. This growth is driven by increased prevalence of rare diseases, investment in research and development, and expedited regulatory pathways for orphan drugs.
As a small-cap company, Applied Therapeutics currently only sells its products in the United States. However, the company's partnership with Advanz Pharma for AT-007 in Europe suggests potential for future international expansion.
Executive Changes
In December 2024, Applied Therapeutics underwent significant leadership changes. The company's founder and CEO, Dr. Shoshana Shendelman, stepped down from her roles. John H. Johnson was appointed as Executive Chairman, and Les Funtleyder was named as Interim CEO. These changes come at a critical time for the company as it navigates regulatory challenges and advances its pipeline.
Outlook and Conclusion
Despite the recent regulatory setback, Applied Therapeutics remains a company with significant potential in the rare disease space. The company's commitment to advancing its pipeline, its diverse portfolio of product candidates, and its ability to secure funding demonstrate its resilience and its ongoing efforts to create transformative treatments for patients in need.
As the company navigates the challenges ahead, investors will be closely watching the progress of its SORD Deficiency program and any potential developments in its Galactosemia strategy. With a focus on innovation, perseverance, and a deep understanding of the rare disease landscape, Applied Therapeutics is poised to continue making strides in this complex and highly rewarding field.
The company's near-term success will largely depend on the regulatory outcomes for AT-007 in Galactosemia and SORD Deficiency, as well as the continued clinical development and commercialization strategy for its other product candidates. As Applied Therapeutics works to address the FDA's concerns and potentially resubmit its NDA for AT-007 in Galactosemia, it will be crucial for the company to maintain its financial stability and advance its other programs to mitigate risk and create multiple paths to potential success in the competitive rare disease market.