Applied Therapeutics plummets 76% after FDA declines to approve drug
On Friday, November 29, shares of the small-cap biopharmaceutical company Applied Therapeutics plummeted 76% after the FDA declined to approve its drug to treat a rare genetic metabolic disease, jeopardizing its plans to launch its first commercial product. Applied Therapeutics, which is also pursuing drug approval in Europe, says it is considering appealing the FDA’s decision or resubmitting its application.
Details
On Friday, Applied Therapeutics stock plunged 76% to $2.03 per share, hitting an 11-month low. Over the last two trading sessions, the stock has lost more than 80%. As of Friday, the company’s market capitalization stood at $236 million.
What’s behind Friday’s plunge
The day before the Thanksgiving holiday, Wednesday, November 27, Applied Therapeutics announced that the FDA had rejected govorestat, its drug for patients with galactosemia, a rare genetic metabolic disease with no approved treatments. The FDA’s rejection letter cited deficiencies in the clinical application as the reason for not approving the drug in its current form. This has cast a cloud over Applied Therapeutics’ hopes for its first commercial product, Reuters reports.
The company expressed disappointment with the decision, stating that it was reviewing the FDA’s response and planned to request a meeting to discuss a potential reapplication or appeal.
“Our strong commitment to the galactosemia community is rooted in our belief that govorestat has the potential to change the lives of patients with galactosemia, which we believe is evidenced by the breadth of efficacy and safety data demonstrating its ability to stop the decline on progressive clinical outcomes, including cognition and behavior,” company founder and CEO Shoshana Shendelman was quoted as saying in the press release.
Note that in March, the FDA postponed its decision on the drug, stating it needed to analyze additional data provided by the company. Applied Therapeutics has also submitted a marketing application for galactosemia to the European Medicines Agency (EMA), Reuters adds.
Analyst insights
Following the FDA’s decision, RBC Capital Markets downgraded its rating for Applied Therapeutics stock from “outperform” to “sector perform” (equivalent to a “hold” recommendation), according to Investing.com. RBC analyst Brian Abrahams slashed the stock’s target price from $12 per share to $4 per share, which is still double the current market price.
In a note, Abrahams highlighted increased risks and uncertainties surrounding the future of govorestat. However, he also pointed to a potential opportunity for the drug to treat another hereditary condition, SORD deficiency, which would entail a larger patient population. He nevertheless noted that doubts remain over whether Applied Therapeutics can present a “convincing enough data package” to regulators. In addition, the approval process may take considerable time.
