Applied Therapeutics(APLT) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited financial statements, management's analysis, market risk disclosures, and internal controls Item 1. Financial Statements (Unaudited) The company's financial statements show a significant net loss, decreased cash and equity, and a 'going concern' warning due to funding needs Condensed Balance Sheets As of June 30, 2025, the company's total assets decreased to $37.3 million from $86.7 million at year-end 2024, primarily driven by a reduction in cash and cash equivalents from $79.4 million to $30.4 million Condensed Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $30,421 | $79,398 | | Total current assets | $34,511 | $83,646 | | Total Assets | $37,342 | $86,691 | | Liabilities & Equity | | | | Total current liabilities | $17,749 | $27,296 | | Total liabilities | $19,904 | $29,685 | | Total stockholders' equity | $17,438 | $57,006 | | Total Liabilities & Stockholders' Equity | $37,342 | $86,691 | Condensed Statements of Operations For the three months ended June 30, 2025, the company reported a net loss of $21.3 million, compared to a net income of $2.9 million in the same period of 2024 Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $0 | $144 | $0 | $334 | | Research and Development | $9,923 | $10,004 | $17,760 | $22,221 | | General and Administrative | $13,175 | $10,580 | $30,863 | $19,646 | | Loss from Operations | $(23,098) | $(20,440) | $(48,623) | $(41,533) | | Change in fair value of warrant liabilities | $1,437 | $22,744 | $4,541 | $(40,660) | | Net Income (Loss) | $(21,330) | $2,898 | $(43,155) | $(81,040) | | Net Income (Loss) per Share - basic | $(0.15) | $0.02 | $(0.30) | $(0.60) | Condensed Statements of Stockholders' Equity/(Deficit) Stockholders' equity decreased from $57.0 million at the beginning of 2025 to $17.4 million as of June 30, 2025 - The company's accumulated deficit grew from $574.2 million at the start of 2025 to $617.4 million by the end of Q2 2025, reflecting the ongoing net losses[27] Condensed Statements of Cash Flows For the first six months of 2025, the company used $49.0 million in cash for operating activities and had no financing activities, resulting in a cash balance of $30.4 million Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(48,977) | $(41,506) | | Net cash provided by financing activities | $0 | $113,805 | | Net (Decrease) Increase in Cash | $(48,977) | $72,299 | | Cash at beginning of period | $79,398 | $49,898 | | Cash at end of period | $30,421 | $122,197 | Notes to Condensed Financial Statements (Unaudited) Notes detail accounting policies, a 'going concern' warning, license agreements, warrant liabilities, litigation, and the AT-001 out-licensing agreement - Management has concluded that substantial doubt exists regarding the company's ability to continue as a going concern within one year, given its net loss of $43.2 million for the six months ended June 30, 2025, and cash balance of $30.4 million[35][36] - The company is involved in a securities class action lawsuit and a shareholder derivative action. As of June 30, 2025, the probability of loss was deemed reasonably possible, but the company could not estimate a range of loss and has not recorded a liability[123][124][125] - On July 31, 2025, the company entered into an out-licensing agreement with Biossil, Inc. for AT-001, receiving a $1.0 million upfront payment and eligibility for future royalties and milestones[126] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses clinical developments, including FDA setbacks for govorestat, increased G&A expenses, decreased cash, and the 'going concern' warning, emphasizing the need for additional capital Overview Applied Therapeutics is a clinical-stage biopharmaceutical company developing novel product candidates against validated molecular targets in rare diseases, with a primary focus on aldose reductase (AR) inhibitors - The FDA issued a Complete Response Letter (CRL) for the govorestat NDA for Classic Galactosemia in November 2024, citing deficiencies in the clinical application. The company subsequently withdrew its European Marketing Authorization Application (MAA)[130] - The company is analyzing data from the Phase 2/3 INSPIRE trial for AT-007 in CMT-SORD and plans to meet with the FDA in Q3 2025 to discuss a potential NDA submission[132] - On July 31, 2025, the company out-licensed its AT-001 (caficrestat) program for Diabetic Cardiomyopathy to Biossil, Inc., receiving a $1.0 million upfront payment[135] Results of Operations For the three and six months ended June 30, 2025, the company reported increased net losses from operations compared to the prior year, primarily driven by a significant rise in general and administrative expenses Comparison of R&D Expenses (in thousands) | Expense Category | Six Months 2025 | Six Months 2024 | Change | | :--- | :--- | :--- | :--- | | Clinical and pre-clinical | $7,328 | $14,621 | $(7,293) | | Drug manufacturing and formulation | $1,658 | $68 | $1,590 | | Personnel expenses | $5,408 | $3,592 | $1,816 | | Total R&D Expenses | $17,760 | $22,221 | $(4,461) | Comparison of G&A Expenses (in thousands) | Expense Category | Six Months 2025 | Six Months 2024 | Change | | :--- | :--- | :--- | :--- | | Legal and professional fees | $20,058 | $5,563 | $14,495 | | Commercial expenses | $1,297 | $5,288 | $(3,991) | | Personnel expenses | $4,937 | $3,339 | $1,598 | | Total G&A Expenses | $30,863 | $19,646 | $11,217 | Liquidity and Capital Resources The company's financial position raises substantial doubt about its ability to continue as a going concern, with cash and cash equivalents of $30.4 million as of June 30, 2025 - The company concluded there is substantial doubt about its ability to continue as a going concern for 12 months beyond the filing date, with cash and cash equivalents of $30.4 million as of June 30, 2025[172] - Net cash used in operating activities was $49.0 million for the first six months of 2025, an increase from $41.5 million in the prior year period[175][176] - No cash was provided by financing activities in the first six months of 2025, compared to $113.8 million in the same period of 2024, which included proceeds from a private placement and ATM agreement sales[179][180] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate sensitivity and foreign currency sensitivity, with $30.4 million in cash and cash equivalents exposed to fluctuations - The company's cash and cash equivalents of $30.4 million as of June 30, 2025, are subject to interest rate risk[194] - The company is subject to foreign exchange risk from service agreements denominated primarily in the Euro, but does not engage in hedging activities[196] Controls and Procedures Management concluded that disclosure controls were effective as of June 30, 2025, with a previously identified material weakness fully remediated - A material weakness related to the information and communication component of the COSO framework, reported for the fiscal year ended December 31, 2024, was fully remediated as of June 30, 2025[199][201] - Remediation actions included the appointment of a new executive chairman and interim CEO, instituting a cross-functional quality council, and hiring a chief regulatory officer and a head of quality[200] PART II. OTHER INFORMATION This section details legal proceedings, comprehensive risk factors, equity sales, and other disclosures pertinent to the company's operations Legal Proceedings The company is involved in a consolidated securities class action lawsuit and a shareholder derivative action, both stemming from allegations related to the govorestat NDA - A consolidated securities class action lawsuit (In re Applied Therapeutics Securities Litigation) alleges violations of the Securities Exchange Act related to statements made between January 3, 2024, and December 2, 2024, concerning the govorestat NDA[206] - A shareholder derivative action (Hassine v. Shendelman, et al.) has been filed against certain current and former officers and directors based on similar facts as the class action. This action was temporarily stayed by the court on March 5, 2025[207] Risk Factors The company faces substantial risks including ongoing losses, a 'going concern' warning, regulatory setbacks for govorestat, funding needs, litigation, third-party reliance, IP vulnerabilities, and stock price volatility Risks Related to Financial Position and Capital Needs The company has a history of significant operating losses, an accumulated deficit of $617.4 million, and a 'going concern' warning, necessitating substantial additional capital - The company has incurred significant operating losses since inception, with a net loss of $43.2 million for the six months ended June 30, 2025, and an accumulated deficit of $617.4 million[213] - The independent registered public accounting firm's report includes a 'going concern' paragraph, indicating substantial doubt about the company's ability to continue operations for 12 months beyond the filing date due to its financial condition[220] - The company requires substantial additional funding to finance operations, and failure to raise capital could force it to delay, reduce, or terminate development programs[233] Risks Related to the Development and Commercialization of Our Product Candidates The company's success is highly dependent on its product candidates, particularly govorestat (AT-007), which faces significant regulatory hurdles and development risks - In November 2024, the company received a Warning Letter from the FDA related to its AT-007-1002 study, identifying issues with electronic data capture and a dosing error. Failure to resolve these matters could impede future clinical trials and NDA submissions[246] - The FDA issued a Complete Response Letter (CRL) for the govorestat NDA for Classic Galactosemia, stating the application is not approvable in its current form due to clinical deficiencies and failure to meet primary endpoints[248] - All current clinical-stage product candidates target the inhibition of aldose reductase, a mechanism of action for which there are no approved drugs in the U.S., posing a fundamental risk to the entire pipeline[280] Risks Related to Our Dependence on Third Parties The company heavily relies on third parties for critical functions like clinical trials and manufacturing, introducing risks of delays, unreliable data, and inability to obtain regulatory approval - A clinical investigator for the AT-007-1002 study received a Warning Letter from the FDA in November 2024 for non-compliance with regulations, including deviations from the investigational plan. This could impact the data's reliability and future regulatory submissions[352][353] - The company is dependent on third-party contract manufacturers for clinical and potential commercial supplies and does not own its own manufacturing facilities. Any failure by these manufacturers to comply with cGMP or meet specifications could halt development and commercialization[354] - The company relies on CROs to conduct and monitor clinical trials and is responsible for ensuring their compliance with GCP. Failures by CROs could result in unreliable data and require repeating trials, delaying the approval process[360][361] Risks Related to Our Intellectual Property The company's business is critically dependent on licensed intellectual property, facing risks of license breaches, uncertain patent protection, and potential infringement claims - The company's core product candidates, including AT-007, AT-001, and AT-003, are dependent on an exclusive license agreement with Columbia University. A breach or termination of this agreement could halt the development of these products[369][371] - The patent landscape for biotechnology is uncertain, and the company's pending applications may not result in issued patents that provide meaningful protection or prevent competitors from developing similar products[373][374] - The company may face legal proceedings from third parties alleging infringement of their intellectual property rights, which could be costly, time-consuming, and could force the company to cease development or obtain expensive licenses[383][385] Risks Related to Our Business Operations, Employee Matters and Managing Growth The company is exposed to significant operational risks, including ongoing litigation, recent leadership changes, and vulnerabilities in internal computer systems - The company is defending against a securities class action lawsuit and a shareholder derivative action following the negative FDA updates in November 2024, which could result in substantial costs and divert resources[409][412] - Recent leadership changes, including the departure of the founder, President, and CEO in December 2024, may create uncertainty and disrupt business and investor relationships[414] - Internal computer systems are vulnerable to cyber-attacks, which could lead to the loss of clinical trial data, trade secrets, or other proprietary information, potentially delaying regulatory approval and harming the business[419] Risks Related to Ownership of Our Common Stock Ownership of the company's common stock involves high risk due to extreme price volatility, potential delisting from Nasdaq, and no anticipated dividends - The market price of the company's common stock is extremely volatile and has declined significantly, particularly following the FDA's Complete Response Letter and Warning Letter in November 2024[425][411] - On February 7, 2025, the company received a deficiency letter from Nasdaq for failing to maintain the minimum $1.00 bid price, which could lead to the delisting of its common stock if compliance is not regained[431] - The company has never paid cash dividends and does not intend to in the foreseeable future, meaning capital appreciation is the sole potential source of gain for stockholders[433] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period covered by this report - There were no unregistered sales of equity securities during the reporting period[453] Defaults Upon Senior Securities Not applicable. The company reports no defaults upon senior securities Mine Safety Disclosures Not applicable. The company has no mine safety disclosures to report Other Information The company reports that no officer or director adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the six months ended June 30, 2025 - No officer or director adopted or terminated a Rule 10b5-1 trading plan during the six months ended June 30, 2025[456] Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including management contracts and certifications - Exhibits filed include management contracts and certifications required under the Exchange Act and Sarbanes-Oxley Act[458]