Applied Therapeutics(US:APLT)2025-05-13 21:32PART I. FINANCIAL INFORMATION This section details the unaudited financial statements, management's analysis, market risk, and internal controls Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed financial statements for Q1 2025, highlighting a net loss of $(21,825) thousand and a going concern doubt Condensed Balance Sheets Condensed Balance Sheet Highlights (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $50,762 | $79,398 | | Total current assets | $53,966 | $83,646 | | Total Assets | $56,907 | $86,691 | | Total current liabilities | $17,965 | $27,296 | | Total Liabilities | $20,239 | $29,685 | | Total stockholders' equity | $36,668 | $57,006 | - Cash and cash equivalents decreased by $28,636 thousand during the first quarter of 2025, from $79,398 thousand at the end of 2024 to $50,762 thousand18 Condensed Statements of Operations Condensed Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total revenue | $0 | $190 | | Research and development | $7,837 | $12,217 | | General and administrative | $17,688 | $9,066 | | Loss from operations | $(25,525) | $(21,093) | | Change in fair value of warrant liabilities | $3,104 | $(63,405) | | Net loss | $(21,825) | $(83,938) | | Net loss per share | $(0.15) | $(0.67) | - The net loss significantly narrowed to $(21,825) thousand in Q1 2025 from $(83,938) thousand in Q1 2024, primarily due to a positive change in the fair value of warrant liabilities, which was a $3,104 thousand gain in 2025 versus a $(63,405) thousand expense in 202421 Condensed Statements of Stockholders' Equity/(Deficit) - The company's accumulated deficit grew from $574,200 thousand at the beginning of 2025 to $596,025 thousand by March 31, 2025, reflecting the net loss incurred during the quarter26 Condensed Statements of Cash Flows - Net cash used in operating activities was $28,636 thousand for the three months ended March 31, 2025, an increase from $18,900 thousand in the same period of 202428 - There were no financing activities in Q1 2025, in contrast to Q1 2024 when the company generated $115,500 thousand from financing activities, including the issuance of common stock and warrants28 Notes to Condensed Financial Statements (Unaudited) - Management has concluded that substantial doubt exists regarding the company's ability to continue as a going concern for one year from the issuance of these financial statements, based on a net loss of $(21,825) thousand for the quarter, an accumulated deficit of $596,025 thousand, and cash and cash equivalents of $50,762 thousand as of March 31, 20253536 - The company is involved in a securities class action lawsuit and a shareholder derivative lawsuit. As of March 31, 2025, the probability of loss was deemed reasonably possible, but no liability has been recorded as the amount cannot be estimated127129130 - Revenue recognized from the Advanz Pharma agreement was $0 thousand for the three months ended March 31, 2025, compared to $200 thousand in the same period of 2024, as the related research and development services performance obligation nears completion124 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's clinical-stage status, the FDA's Complete Response Letter for govorestat, and the critical liquidity position with a going concern doubt - In November 2024, the FDA issued a Complete Response Letter for the New Drug Application (NDA) for govorestat (AT-007) for Classic Galactosemia, indicating it could not be approved in its current form. The company subsequently withdrew its European Marketing Authorization Application (MAA)135 Comparison of Operating Expenses (in thousands) | Expense Category | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Research & Development | $7,837 | $12,217 | $(4,380) | | General & Administrative | $17,688 | $9,066 | $8,622 | - The $4,380 thousand decrease in R&D expenses was primarily driven by a $5,600 thousand reduction in clinical and pre-clinical costs for AT-007 and AT-001. The $8,622 thousand increase in G&A expenses was mainly due to a $9,700 thousand rise in legal and professional fees related to litigation and responding to the FDA's CRL and warning letter166171 - The company's cash and cash equivalents were $50,762 thousand as of March 31, 2025. Management has concluded there is substantial doubt about the company's ability to continue as a going concern for the next 12 months due to its operating losses and funding needs170 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risk is primarily interest rate sensitivity on cash and foreign currency risk, neither of which is considered significant - The primary market risk is interest rate sensitivity on the company's $50,762 thousand in cash and cash equivalents. The investment objective is to preserve principal, and the company does not believe there is significant risk of default or illiquidity191192 - Foreign currency sensitivity arises from some service agreements denominated in currencies other than the U.S. Dollar, mainly the Euro. The company does not hedge this exposure and believes a hypothetical 10% change in exchange rates would not have a material impact193 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective due to a material weakness in internal control over financial reporting, despite ongoing remediation efforts - Management concluded that disclosure controls and procedures were not effective as of March 31, 2025, due to a material weakness in internal control over financial reporting196 - The material weakness stems from deficiencies in the information and communication component of the COSO framework, specifically a failure to ensure timely and reliable communication between the former CEO, senior management, and the board of directors198 - Remediation actions include appointing a new executive chairman and interim CEO, instituting a new disclosure review process, and creating a cross-functional quality council. However, the material weakness cannot be considered fully remedied until the new controls have operated effectively for a sufficient period199200201 PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings The company is involved in a consolidated securities class action and a shareholder derivative action related to govorestat NDA statements - A consolidated securities class action lawsuit (In re Applied Therapeutics Securities Litigation) alleges violations of the Securities Exchange Act by the company and certain officers/directors regarding statements made about the govorestat NDA205 - A shareholder derivative action (Hassine v. Shendelman, et al.) has been filed against certain officers/directors for breach of fiduciary duty and other claims, based on substantially the same facts as the class action. This case has been temporarily stayed206 Item 1A. Risk Factors This section outlines substantial risks including financial instability, regulatory setbacks for govorestat, operational dependencies, and stock price volatility - Financial Risks: The company has a history of significant losses, and its independent auditor's report includes a "going concern" explanatory paragraph. A material weakness in internal control over financial reporting was identified as of December 31, 2024212225228 - Regulatory Risks: The FDA issued a Complete Response Letter for the govorestat NDA and a Warning Letter related to a clinical study, creating significant uncertainty for the product's approval and the company's future clinical trials212254257 - Operational & Management Risks: The company relies heavily on third parties for clinical trials and manufacturing. It recently experienced the departure of its founder and CEO, creating leadership uncertainty. The company is also defending against securities class action and shareholder derivative litigation215216424 - Stock Ownership Risks: The company's stock price is highly volatile. It received a deficiency letter from Nasdaq for its stock price closing below the $1.00 minimum bid price requirement for over 30 consecutive days435441 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the quarter ended March 31, 2025 - None461 Item 3. Defaults Upon Senior Securities This item is not applicable as the company has no defaults upon senior securities to report - Not applicable464 Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable465 Item 5. Other Information The company states that no officer or director adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the first quarter of 2025 - During the three months ended March 31, 2025, no officer or director adopted or terminated a Rule 10b5-1 trading arrangement466 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including employment agreements and Sarbanes-Oxley Act certifications - The report includes certifications from the Executive Chairman (Principal Executive Officer) and the Interim CEO/CFO (Principal Financial Officer) pursuant to Sarbanes-Oxley Act requirements468