Applied Therapeutics (NASDAQ: APLT), a biopharmaceutical company, is facing a federal securities class-action lawsuit filed by investor Adrian Alexandru on behalf of similarly affected shareholders. The lawsuit alleges that Applied Therapeutics violated federal securities laws by misleading investors about the clinical trial data for its lead drug candidate, Govorestat.
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The lawsuit centers around claims that Applied Therapeutics presented a deceptively positive picture of the Phase 3 INSPIRE trial for Govorestat in treating Galactosemia, failing to disclose critical adverse facts that ultimately led to significant financial losses for investors. The class action encompasses investors who purchased Applied Therapeutics securities between January 3, 2024, and December 2, 2024.
Key Allegations and FDA Scrutiny
A copy of the lawsuit, published online by Bloomberg Law, details allegations of significant issues with the INSPIRE trial, including problems with electronic data capture and dosing errors during the crucial dose-escalation phase. These issues, the lawsuit claims, were deliberately concealed from investors.
The situation escalated on November 27, 2024, when Applied Therapeutics received a Complete Response Letter (CRL) from the U.S. Food and Drug Administration (FDA). The CRL indicated that the FDA could not approve the New Drug Application for Govorestat in its current form due to deficiencies in the clinical application. This news triggered a sharp decline in Applied Therapeutics’ stock price.
Further damaging the company’s standing, a subsequent FDA warning letter on December 2nd highlighted unresolved clinical trial issues, specifically citing the electronic data capture problems and a dosing error that resulted in some patients receiving lower-than-targeted doses during the trial’s early phase. While Applied Therapeutics maintains that these issues were addressed through detailed records and prior communications with the FDA, investors reacted negatively, leading to further erosion of the stock’s value.
Investor Concerns and Leadership Changes
The lawsuit aims to recover damages for investors who purchased shares at artificially inflated prices, arguing that the company’s lack of transparency and accurate information misled the market.
Amidst these challenges, Applied Therapeutics announced significant leadership changes. John Johnson was appointed as Executive Chairman, replacing Shoshana Shendelman, who stepped down as Chair and CEO. Les Funtleyder, the company’s CFO, was named interim CEO. These changes occurred alongside a significant downgrade by RBC Capital, which lowered its price target for Applied Therapeutics from $4 to $1.5, maintaining a Sector Perform rating.
Market Reaction and Future Outlook
Following the news of the lawsuit and FDA actions, Applied Therapeutics’ stock price plummeted 13.7% to close at $0.87 on Friday, December 6th, 2024. The company’s future prospects remain uncertain as it navigates the legal challenges and works to address the FDA’s concerns regarding Govorestat’s clinical data. The outcome of the lawsuit and the company’s ability to resolve the clinical trial issues will significantly impact its future trajectory. This ongoing situation underscores the importance of transparency and rigorous data integrity in the biopharmaceutical industry.
