Today, we are putting Applied Therapeutics, Inc. (APLT) in the spotlight for the first time since our last article on this small-cap name in October of last year. We concluded that piece by saying that the company was on the cusp of submitting its first marketing applications and was quite likely to do a capital raise in the near future. Both of those events happened early this year. Therefore, it is time to circle back to Applied Therapeutics. An updated analysis follows below.

Applied Therapeutics is headquartered in New York City. This clinical stage biotech concern is focused on developing novel product candidates against validated molecular targets in indications of high unmet medical need. The stock currently trades just under $6.00 a share and sports an approximate market capitalization of $675 million.

The company’s two primary pipeline candidates are Aldose Reductase Inhibitors or ARIs and are dubbed AT-001 and AT-007. The latter is also known as govorestat. AT-007 crosses the blood brain barrier into the Central Nervous System. The compound is being developed to treat several rare diseases, including Galactosemia, for which it has received Orphan Drug and Pediatric Rare Disease designations. Galactosemia is a rare and slowly progressing metabolic disease. The disease affects approximately 1 in every 45,000 individuals. It is caused by a genetic inability to break down the sugar galactose. AT-007 inhibits aldose reductase, which plays a crucial role in the pathogenesis of Galactosemia.

AT-007 has encouraging results to treat Sorbitol Dehydrogenase Deficiency or SORD and is in late-stage development. Govorestat also has Orphan Drug designation for this indication, it should be noted.

Recent Events:

Let’s recap some important events since we last looked at Applied Therapeutics. To kick off 2024, in early January, AT-001, which was being developed to treat patients with diabetic cardiomyopathy, suffered a setback. A Phase 3 trial produced only mixed results. Management said that the company would now be focused on finding a partner to help develop the drug. Meaning that development is currently on hold until that mission is accomplished.

This makes AT-007, or govorestat, the company’s only real late-stage asset for now. Applied Therapeutics also has AT-003 within its pipeline. This is an ARI designed to cross through the back of the eye when dosed orally, for the treatment of Diabetic retinopathy. However, it is still in early clinical stage development and will not be germane to this analysis. AT-007 is also being evaluated in early-stage development for Phosphomannomutase 2 deficiency (PMM2-CDG), which is an extremely rare condition with no approved treatments.

In February, the company disclosed positive 12-month interim data from an ongoing pivotal Phase 3 study “INSPIRE” which was evaluating govorestat to treat SORD. This disease causes motor neuron degeneration and loss of mobility and motility. The data showed that this 56-person trial had met both primary and secondary endpoints. There will be another key readout at the 24-month mark. However, management has met with the FDA and plans to file an accelerated NDA for this indication in the first quarter of 2025.

The company has also now submitted marketing applications for AT–7 to treat Galactosemia in both the U.S. and Europe after producing solid trial results that demonstrated the efficacy and safety of the drug against Galactosemia for different age groups. The action date by the FDA is late November, with an Ad Comm Panel scheduled for October 9th. The approval timeline in Europe is early in the first quarter of 2025.

Analyst Commentary & Balance Sheet:

The analyst community is optimistic about the prospects of Applied Therapeutics. Since the company posted its Q2 results on August 7th, four analyst firms including RBC Capital and Citigroup have reiterated/initiated Buy ratings on APLT. Price targets proffered range from $8 to $14 a share.

Applied Therapeutics ended the first half of 2024 with just over $120 million worth of cash and marketable securities on its balance sheet. Management has this is sufficient to fund all planned activities into 2026. The company last did a capital raise in late February, when it garnered approximately $100 million in new funding via a private placement. In addition, given AT-007 has a Pediatric Rare Disease designation, if approved, it will garner a Pediatric Rare Disease voucher for Galactosemia. These can typically be sold for $100 million to $125 million on the open market.

There was a notable pickup in insider selling in August. Several insiders sold just under $5 million worth of stock collectively during the month. This was significantly more than insiders had disposed of through 2024 until the end of the month. The company filed a prospectus related to the proposed resale of roughly 14.3 million common shares by the selling stockholders in late March.

Conclusion:

Applied Therapeutics, Inc.’s AT-007 seems to be proceeding along towards approval for Galactosemia in the coming months. Given there are only approximately 3,000 people afflicted with this condition in the U.S., and no existing approved treatments, rollout of the drug pending approval should be relatively straightforward and doesn’t require a large sales organization. I would also expect the company to sell the voucher that will come with approval to bolster its balance sheet. If all goes well, a second approved indication for SORD should soon follow.

Investing in any clinical stage biotech/biopharma company involves risk. However, Applied Therapeutics’ risk/reward profile seems attractive for aggressive investors within a well-diversified portfolio. Therefore, I have recently taken a small “watch item” position in the stock via covered call orders pending further developments.