[10-Q] Applied Therapeutics, Inc. Quarterly Earnings Report
Applied Therapeutics, Inc. reported unaudited Q2 2025 financials showing a sharp decline in liquidity and continued operating losses. Cash and cash equivalents totaled $30.4 million at June 30, 2025, down from $79.4 million at December 31, 2024, while total assets fell to $37.3 million from $86.7 million. The company recorded a net loss of $21.3 million for the quarter and $43.2 million for the six months ended June 30, 2025, driven by R&D and G&A expenses. Operating cash used was $49.0 million for the six months.
The company disclosed material events: an FDA Complete Response Letter and Warning Letter related to the govorestat (AT-007) NDA for Classic Galactosemia, ongoing securities and derivative litigation, and management concluded that substantial doubt exists about its ability to continue as a going concern within one year. Offsetting commercial arrangements include a license to Advanz Pharma with an upfront EUR 10.0 million payment and potential future milestones and royalties, and a subsequent July 31, 2025 out-license of AT-001 to Biossil with a $1.0 million upfront payment.
Applied Therapeutics, Inc. ha comunicato bilanci non verificati del secondo trimestre 2025 che evidenziano un marcato calo della liquidit脿 e perdite operative continue. Al 30 giugno 2025 la societ脿 disponeva di $30.4 million in cassa e mezzi equivalenti, in calo rispetto a $79.4 million al 31 dicembre 2024; le attivit脿 totali sono scese a $37.3 million da $86.7 million. La societ脿 ha registrato una perdita netta di $21.3 million per il trimestre e di $43.2 million per i sei mesi chiusi al 30 giugno 2025, principalmente a causa delle spese per ricerca e sviluppo (R&D) e delle spese generali e amministrative (G&A). Il flusso di cassa operativo utilizzato nei sei mesi 猫 stato di $49.0 million.
Tra gli eventi materiali segnalati figurano una Complete Response Letter e una Warning Letter della FDA relative alla NDA per govorestat (AT-007) nella Classic Galactosemia, contenziosi in corso su titoli e derivati, e la conclusione della direzione secondo cui sussistono dubbi sostanziali sulla capacit脿 della societ脿 di continuare come going concern entro un anno. Gli accordi commerciali compensativi includono una licenza ad Advanz Pharma con un pagamento iniziale di EUR 10.0 million e potenziali milestone e royalty future, e un'out-license di AT-001 a Biossil del 31 luglio 2025 con un pagamento iniziale di $1.0 million.
Applied Therapeutics, Inc. inform贸 estados financieros no auditados del segundo trimestre de 2025 que muestran una fuerte ca铆da de la liquidez y p茅rdidas operativas continuas. Al 30 de junio de 2025, el efectivo y equivalentes de efectivo ascend铆an a $30.4 million, frente a $79.4 million al 31 de diciembre de 2024; los activos totales se redujeron a $37.3 million desde $86.7 million. La compa帽铆a registr贸 una p茅rdida neta de $21.3 million en el trimestre y de $43.2 million en los seis meses cerrados el 30 de junio de 2025, impulsada por gastos de I+D y gastos generales y administrativos (G&A). El efectivo neto usado en operaciones fue de $49.0 million en el semestre.
La empresa divulg贸 eventos materiales: una Complete Response Letter y una Warning Letter de la FDA relacionadas con la NDA de govorestat (AT-007) para la galactosemia cl谩sica, litigios en curso sobre valores y derivados, y la direcci贸n concluy贸 que existen dudas sustanciales sobre su capacidad para continuar como empresa en funcionamiento en el plazo de un a帽o. Entre los acuerdos comerciales compensatorios figuran una licencia a Advanz Pharma con un pago inicial de EUR 10.0 million y posibles hitos y regal铆as futuras, y una out-license de AT-001 a Biossil con fecha 31 de julio de 2025 y un pago inicial de $1.0 million.
Applied Therapeutics, Inc.電� 氙戈皭靷� 2025雲� 2攵勱赴 鞛鞛愲毳� 氚滍憸頃橂┌ 鞙犽彊靹膘澊 旮夑博頌� 臧愳唽頃橁碃 鞓侅梾靻愳嫟鞚� 歆�靻嶋悩瓿� 鞛堨潓鞚� 氤搓碃頄堨姷雼堧嫟. 2025雲� 6鞗� 30鞚� 旮办 順勱笀 氚� 順勱笀靹� 鞛愳偘鞚� $30.4 million鞙茧 2024雲� 12鞗� 31鞚检潣 $79.4 million鞐愳劀 欷勳棃瓿�, 齑濎瀽靷办潃 $86.7 million鞐愳劀 $37.3 million鞙茧 臧愳唽頄堨姷雼堧嫟. 須岇偓電� 攵勱赴 靾滌啇鞁� $21.3 million瓿� 2025雲� 6鞗� 30鞚� 膦呺霅� 6臧滌洈 雸勱硠 靾滌啇鞁� $43.2 million鞚� 旮半頄堨溂氅�, 鞚措姅 鞐瓣惮臧滊皽(R&D) 氚� 鞚茧皹甏�毽箘(G&A)鞐� 旮办澑頃╇媹雼�. 6臧滌洈臧� 鞓侅梾頇滊彊鞙茧 靷毄霅� 順勱笀鞚� $49.0 million鞛呺媹雼�.
欷戨寑頃� 靷贝鞙茧電� 氙戈淡 FDA鞚� Complete Response Letter 氚� Warning Letter(瓴疥碃靹�)臧� govorestat(AT-007) NDA(鞁犾暯項堦皜鞁犾箔靹溌讽伌霝橃嫕 臧堧澖韱犾劯氙胳晞 甏�霠�)鞐� 氚滍枆霅� 鞝�, 歃濌秾 氚� 韺岇儩靸來拡 甏�霠� 靻岇啞鞚� 歆勴枆 欷戩澑 鞝�, 攴鸽Μ瓿� 瓴届榿歆勳澊 頄ロ泟 1雲� 雮� 瓿勳啀旮办梾 臁挫啀 電ル牓鞐� 雽�頃� 欷戨寑頃� 鞚橂鞚� 鞛堧嫟瓿� 瓴半 雮措Π 鞝愳澊 韽暔霅╇媹雼�. 鞚措ゼ 靸侅噭頃橂姅 靸侅梾鞝� 瓿勳暯鞙茧電� Advanz Pharma鞐� 雽�頃� 霛检澊靹犾姢(靹犼笁旮� EUR 10.0 million 氚� 頄ロ泟 毵堨澕鞀ろ啢路搿滌棿韹� 臧�電�)鞕� 2025雲� 7鞗� 31鞚检瀽 AT-001鞚� Biossil 鞎勳泝霛检澊靹犾姢(靹犼笁旮� $1.0 million)臧� 韽暔霅╇媹雼�.
Applied Therapeutics, Inc. a publi茅 des comptes non audit茅s pour le deuxi猫me trimestre 2025 montrant une forte baisse de la liquidit茅 et des pertes d'exploitation persistantes. Au 30 juin 2025, les liquidit茅s et 茅quivalents de tr茅sorerie s'茅levaient 脿 $30.4 million, contre $79.4 million au 31 d茅cembre 2024 ; l'actif total est pass茅 de $86.7 million 脿 $37.3 million. La soci茅t茅 a enregistr茅 une perte nette de $21.3 million pour le trimestre et de $43.2 million pour les six mois clos le 30 juin 2025, principalement en raison des d茅penses de R&D et des frais g茅n茅raux et administratifs (G&A). Les flux de tr茅sorerie d'exploitation utilis茅s se sont 茅lev茅s 脿 $49.0 million sur les six mois.
La soci茅t茅 a divulgu茅 des 茅v茅nements significatifs : une Complete Response Letter et une Warning Letter de la FDA concernant la NDA du govorestat (AT-007) pour la galactos茅mie classique, des litiges en cours li茅s aux titres et aux d茅riv茅s, et la direction a conclu qu'il existe un doute important quant 脿 sa capacit茅 脿 poursuivre son activit茅 sur une p茅riode d'un an. Parmi les accords commerciaux compensatoires figurent une licence accord茅e 脿 Advanz Pharma avec un paiement initial de EUR 10.0 million et des jalons et redevances 茅ventuels, ainsi qu'une cession de licence d'AT-001 脿 Biossil dat茅e du 31 juillet 2025 moyennant un paiement initial de $1.0 million.
Applied Therapeutics, Inc. ver枚ffentlichte ungepr眉fte Finanzergebnisse f眉r das zweite Quartal 2025, die einen deutlichen R眉ckgang der Liquidit盲t und anhaltende operative Verluste zeigen. Zum 30. Juni 2025 beliefen sich Zahlungsmittel und Zahlungsmittel盲quivalente auf $30.4 million, gegen眉ber $79.4 million zum 31. Dezember 2024; die Gesamtaktiva sanken von $86.7 million auf $37.3 million. Das Unternehmen verzeichnete einen Nettoverlust von $21.3 million im Quartal und $43.2 million f眉r die sechs Monate zum 30. Juni 2025, getrieben von Forschungs- und Entwicklungskosten (R&D) sowie allgemeinen Verwaltungsaufwendungen (G&A). Der aus der Gesch盲ftst盲tigkeit genutzte Cashflow betrug $49.0 million f眉r die sechs Monate.
Als wesentliche Ereignisse wurden ein FDA Complete Response Letter und ein Warning Letter in Bezug auf die NDA f眉r govorestat (AT-007) bei klassischer Galaktos盲mie genannt, laufende Rechtsstreitigkeiten zu Wertpapieren und Derivaten sowie die Feststellung des Managements, dass erhebliche Zweifel an der Fortf眉hrungsf盲higkeit innerhalb eines Jahres bestehen. Ausgleichende kommerzielle Vereinbarungen umfassen eine Lizenz an Advanz Pharma mit einer Vorauszahlung von EUR 10.0 million sowie m枚glichen k眉nftigen Meilensteinen und Lizenzgeb眉hren und eine am 31. Juli 2025 durchgef眉hrte Out-Lizenz von AT-001 an Biossil mit einer Vorauszahlung von $1.0 million.
- Advanz license provided a EUR 10.0M (~$10.7M) upfront payment and potential EUR 134M in milestones plus 20% royalties on net sales in the Territory
- Regulatory designations were granted for AT-007: orphan drug and rare pediatric disease designations for Classic Galactosemia and orphan designation for CMT-SORD and PMM2-CDG
- Subsequent out-license of AT-001 to Biossil generated a $1.0M upfront payment and potential future royalties/milestones
- Prior capital raises supported operations earlier in 2024, including a March 2024 private placement with net proceeds of ~$92.3M and ongoing ATM sales raising net proceeds of ~$49.3M to date
- Cash declined to $30.4M at June 30, 2025 from $79.4M at December 31, 2024, indicating reduced liquidity
- Substantial doubt about the company鈥檚 ability to continue as a going concern within one year was concluded by management
- High operating losses and burn: net loss of $21.3M in Q2 2025 and $43.2M for the six months ended June 30, 2025; operating cash used $48.98M in six months
- Regulatory setback: FDA issued a Complete Response Letter and Warning Letter regarding the AT-007 NDA for Classic Galactosemia
- Ongoing securities and derivative litigation (consolidated securities class action and derivative suit) with potential exposure; loss is reasonably possible but not estimable
- Stockholders鈥� equity declined to $17.4M from $57.0M year-over-year
Insights
TL;DR: Material cash decline, large H1 operating loss, and an explicit going-concern warning make near-term financing crucial.
The financial statements show cash falling to $30.4M from $79.4M and operating cash use of $48.98M in H1 2025. Six-month net loss of $43.16M was driven by $17.76M in R&D and $30.86M in G&A year-to-date expense classifications, and a noncash $4.54M favorable change in warrant liability reduced reported other costs. Management explicitly concluded that substantial doubt exists about the company鈥檚 ability to continue as a going concern within one year, indicating financing or monetization of assets will be required. The reduction in warrant liability (from $6.31M to $1.77M) materially impacted reported results but is noncash and volatile. These facts indicate high near-term liquidity risk for investors and creditors.
TL;DR: The company maintains monetization pathways via licensing but upfronts are modest relative to cash burn.
Applied Therapeutics has executed commercial licensing arrangements that provide non-dilutive proceeds and future upside: the Advanz Agreement included an upfront EUR 10.0M (~$10.7M) plus potential EUR 134M of milestones and 20% royalties; the agreement allocated $9.3M of transaction price to the license. A July 31, 2025 subsequent event documents an out-license of AT-001 to Biossil for a $1.0M upfront payment and potential future royalties/milestones. While these deals validate asset value and can provide funding, the upfront amounts disclosed are small relative to current cash burn and the going-concern conclusion, so licensing alone may not eliminate financing needs.
Applied Therapeutics, Inc. ha comunicato bilanci non verificati del secondo trimestre 2025 che evidenziano un marcato calo della liquidit脿 e perdite operative continue. Al 30 giugno 2025 la societ脿 disponeva di $30.4 million in cassa e mezzi equivalenti, in calo rispetto a $79.4 million al 31 dicembre 2024; le attivit脿 totali sono scese a $37.3 million da $86.7 million. La societ脿 ha registrato una perdita netta di $21.3 million per il trimestre e di $43.2 million per i sei mesi chiusi al 30 giugno 2025, principalmente a causa delle spese per ricerca e sviluppo (R&D) e delle spese generali e amministrative (G&A). Il flusso di cassa operativo utilizzato nei sei mesi 猫 stato di $49.0 million.
Tra gli eventi materiali segnalati figurano una Complete Response Letter e una Warning Letter della FDA relative alla NDA per govorestat (AT-007) nella Classic Galactosemia, contenziosi in corso su titoli e derivati, e la conclusione della direzione secondo cui sussistono dubbi sostanziali sulla capacit脿 della societ脿 di continuare come going concern entro un anno. Gli accordi commerciali compensativi includono una licenza ad Advanz Pharma con un pagamento iniziale di EUR 10.0 million e potenziali milestone e royalty future, e un'out-license di AT-001 a Biossil del 31 luglio 2025 con un pagamento iniziale di $1.0 million.
Applied Therapeutics, Inc. inform贸 estados financieros no auditados del segundo trimestre de 2025 que muestran una fuerte ca铆da de la liquidez y p茅rdidas operativas continuas. Al 30 de junio de 2025, el efectivo y equivalentes de efectivo ascend铆an a $30.4 million, frente a $79.4 million al 31 de diciembre de 2024; los activos totales se redujeron a $37.3 million desde $86.7 million. La compa帽铆a registr贸 una p茅rdida neta de $21.3 million en el trimestre y de $43.2 million en los seis meses cerrados el 30 de junio de 2025, impulsada por gastos de I+D y gastos generales y administrativos (G&A). El efectivo neto usado en operaciones fue de $49.0 million en el semestre.
La empresa divulg贸 eventos materiales: una Complete Response Letter y una Warning Letter de la FDA relacionadas con la NDA de govorestat (AT-007) para la galactosemia cl谩sica, litigios en curso sobre valores y derivados, y la direcci贸n concluy贸 que existen dudas sustanciales sobre su capacidad para continuar como empresa en funcionamiento en el plazo de un a帽o. Entre los acuerdos comerciales compensatorios figuran una licencia a Advanz Pharma con un pago inicial de EUR 10.0 million y posibles hitos y regal铆as futuras, y una out-license de AT-001 a Biossil con fecha 31 de julio de 2025 y un pago inicial de $1.0 million.
Applied Therapeutics, Inc.電� 氙戈皭靷� 2025雲� 2攵勱赴 鞛鞛愲毳� 氚滍憸頃橂┌ 鞙犽彊靹膘澊 旮夑博頌� 臧愳唽頃橁碃 鞓侅梾靻愳嫟鞚� 歆�靻嶋悩瓿� 鞛堨潓鞚� 氤搓碃頄堨姷雼堧嫟. 2025雲� 6鞗� 30鞚� 旮办 順勱笀 氚� 順勱笀靹� 鞛愳偘鞚� $30.4 million鞙茧 2024雲� 12鞗� 31鞚检潣 $79.4 million鞐愳劀 欷勳棃瓿�, 齑濎瀽靷办潃 $86.7 million鞐愳劀 $37.3 million鞙茧 臧愳唽頄堨姷雼堧嫟. 須岇偓電� 攵勱赴 靾滌啇鞁� $21.3 million瓿� 2025雲� 6鞗� 30鞚� 膦呺霅� 6臧滌洈 雸勱硠 靾滌啇鞁� $43.2 million鞚� 旮半頄堨溂氅�, 鞚措姅 鞐瓣惮臧滊皽(R&D) 氚� 鞚茧皹甏�毽箘(G&A)鞐� 旮办澑頃╇媹雼�. 6臧滌洈臧� 鞓侅梾頇滊彊鞙茧 靷毄霅� 順勱笀鞚� $49.0 million鞛呺媹雼�.
欷戨寑頃� 靷贝鞙茧電� 氙戈淡 FDA鞚� Complete Response Letter 氚� Warning Letter(瓴疥碃靹�)臧� govorestat(AT-007) NDA(鞁犾暯項堦皜鞁犾箔靹溌讽伌霝橃嫕 臧堧澖韱犾劯氙胳晞 甏�霠�)鞐� 氚滍枆霅� 鞝�, 歃濌秾 氚� 韺岇儩靸來拡 甏�霠� 靻岇啞鞚� 歆勴枆 欷戩澑 鞝�, 攴鸽Μ瓿� 瓴届榿歆勳澊 頄ロ泟 1雲� 雮� 瓿勳啀旮办梾 臁挫啀 電ル牓鞐� 雽�頃� 欷戨寑頃� 鞚橂鞚� 鞛堧嫟瓿� 瓴半 雮措Π 鞝愳澊 韽暔霅╇媹雼�. 鞚措ゼ 靸侅噭頃橂姅 靸侅梾鞝� 瓿勳暯鞙茧電� Advanz Pharma鞐� 雽�頃� 霛检澊靹犾姢(靹犼笁旮� EUR 10.0 million 氚� 頄ロ泟 毵堨澕鞀ろ啢路搿滌棿韹� 臧�電�)鞕� 2025雲� 7鞗� 31鞚检瀽 AT-001鞚� Biossil 鞎勳泝霛检澊靹犾姢(靹犼笁旮� $1.0 million)臧� 韽暔霅╇媹雼�.
Applied Therapeutics, Inc. a publi茅 des comptes non audit茅s pour le deuxi猫me trimestre 2025 montrant une forte baisse de la liquidit茅 et des pertes d'exploitation persistantes. Au 30 juin 2025, les liquidit茅s et 茅quivalents de tr茅sorerie s'茅levaient 脿 $30.4 million, contre $79.4 million au 31 d茅cembre 2024 ; l'actif total est pass茅 de $86.7 million 脿 $37.3 million. La soci茅t茅 a enregistr茅 une perte nette de $21.3 million pour le trimestre et de $43.2 million pour les six mois clos le 30 juin 2025, principalement en raison des d茅penses de R&D et des frais g茅n茅raux et administratifs (G&A). Les flux de tr茅sorerie d'exploitation utilis茅s se sont 茅lev茅s 脿 $49.0 million sur les six mois.
La soci茅t茅 a divulgu茅 des 茅v茅nements significatifs : une Complete Response Letter et une Warning Letter de la FDA concernant la NDA du govorestat (AT-007) pour la galactos茅mie classique, des litiges en cours li茅s aux titres et aux d茅riv茅s, et la direction a conclu qu'il existe un doute important quant 脿 sa capacit茅 脿 poursuivre son activit茅 sur une p茅riode d'un an. Parmi les accords commerciaux compensatoires figurent une licence accord茅e 脿 Advanz Pharma avec un paiement initial de EUR 10.0 million et des jalons et redevances 茅ventuels, ainsi qu'une cession de licence d'AT-001 脿 Biossil dat茅e du 31 juillet 2025 moyennant un paiement initial de $1.0 million.
Applied Therapeutics, Inc. ver枚ffentlichte ungepr眉fte Finanzergebnisse f眉r das zweite Quartal 2025, die einen deutlichen R眉ckgang der Liquidit盲t und anhaltende operative Verluste zeigen. Zum 30. Juni 2025 beliefen sich Zahlungsmittel und Zahlungsmittel盲quivalente auf $30.4 million, gegen眉ber $79.4 million zum 31. Dezember 2024; die Gesamtaktiva sanken von $86.7 million auf $37.3 million. Das Unternehmen verzeichnete einen Nettoverlust von $21.3 million im Quartal und $43.2 million f眉r die sechs Monate zum 30. Juni 2025, getrieben von Forschungs- und Entwicklungskosten (R&D) sowie allgemeinen Verwaltungsaufwendungen (G&A). Der aus der Gesch盲ftst盲tigkeit genutzte Cashflow betrug $49.0 million f眉r die sechs Monate.
Als wesentliche Ereignisse wurden ein FDA Complete Response Letter und ein Warning Letter in Bezug auf die NDA f眉r govorestat (AT-007) bei klassischer Galaktos盲mie genannt, laufende Rechtsstreitigkeiten zu Wertpapieren und Derivaten sowie die Feststellung des Managements, dass erhebliche Zweifel an der Fortf眉hrungsf盲higkeit innerhalb eines Jahres bestehen. Ausgleichende kommerzielle Vereinbarungen umfassen eine Lizenz an Advanz Pharma mit einer Vorauszahlung von EUR 10.0 million sowie m枚glichen k眉nftigen Meilensteinen und Lizenzgeb眉hren und eine am 31. Juli 2025 durchgef眉hrte Out-Lizenz von AT-001 an Biossil mit einer Vorauszahlung von $1.0 million.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______________ to ______________
Commission File Number:
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol |
Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 12, 2025, the registrant had
Table of Contents
Table of Contents
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Special Note Regarding Forward-Looking Statements |
2 |
PART I. |
FINANCIAL INFORMATION |
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Item 1. |
Financial Statements (Unaudited) |
4 |
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Condensed Balance Sheets |
4 |
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Condensed Statements of Operations |
5 |
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Condensed Statements of Stockholders’ Equity/(Deficit) |
6 |
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Condensed Statements of Cash Flows |
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Notes to Condensed Financial Statements (Unaudited) |
9 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
39 |
Item 4. |
Controls and Procedures |
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PART II. |
OTHER INFORMATION |
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Item 1. |
Legal Proceedings |
42 |
Item 1A. |
Risk Factors |
42 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
94 |
Item 3. |
Defaults Upon Senior Securities |
94 |
Item 4. |
Mine Safety Disclosures |
94 |
Item 5. |
Other Information |
94 |
Item 6. |
Exhibits |
95 |
|
Signatures |
96 |
We own various U.S. federal trademarks, including our company name and logo, that we use in connection with the operation of our business. This Quarterly Report on Form 10-Q includes our trademarks and trade names which are protected under applicable intellectual property laws and are our property. This Quarterly Report on Form 10-Q also contains trademarks, trade names and service marks of other companies, which are the property of their respective owners. Solely for convenience, trademarks, trade names and service marks referred to in this Quarterly Report on Form 10-Q may appear without the ®, ™ or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent permitted under applicable law, our rights or the right of the applicable licensor to these trademarks, trade names and service marks. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.
From time to time, we may use our website and our X (formerly known as Twitter) account at @Applied_Tx to distribute material information about us and for complying with our disclosure obligations under Regulation FD. Our financial and other material information is routinely posted to and accessible on the Investors section of our website, available at www.appliedtherapeutics.com. Investors are encouraged to review the Investors & Media section of our website because we may post material information on that site that is not otherwise disseminated by us. Information that is contained in and can be accessed through our website and our X posts are not incorporated into, and does not form a part of, this Quarterly Report on Form 10-Q.
1
Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of the federal securities laws made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future financial condition, future operations, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “opportunity,” “plan,” “predict,” “project”, “positioned,” “potential,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology.
We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” in this Quarterly Report on Form 10-Q:
2
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The foregoing list of risks is not exhaustive. Other sections of this Quarterly Report on Form 10-Q may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements. This Quarterly Report on Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We are responsible for all of the disclosure contained in this Quarterly Report on Form 10-Q, and we believe these industry publications and third-party research, surveys and studies are reliable.
In light of the significant uncertainties in these forward-looking statements, you should not rely upon forward-looking statements as predictions of future events. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur at all. You should refer to the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
This Quarterly Report on Form 10-Q contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Unless the context otherwise requires, the terms “Applied,” “Applied Therapeutics,” “the Company,” “we,” “us,” “our”, “the registrant” and similar references in this Quarterly Report on Form 10-Q refer to Applied Therapeutics, Inc.
3
Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Applied Therapeutics, Inc.
Condensed Balance Sheets
(in thousands, except share and per share data)
(Unaudited)
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As of |
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As of |
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June 30, |
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December 31, |
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2025 |
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2024 |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
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$ |
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Prepaid expenses and other current assets |
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Total current assets |
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Security deposits |
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Operating lease right-of-use asset |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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CURRENT LIABILITIES: |
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Current portion of operating lease liabilities |
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$ |
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$ |
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Accounts payable |
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Accrued expenses and other current liabilities |
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Warrant liabilities |
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Total current liabilities |
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NONCURRENT LIABILITIES: |
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Noncurrent portion of operating lease liabilities |
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Total noncurrent liabilities |
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Total liabilities |
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STOCKHOLDERS’ EQUITY: |
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Common stock, $ |
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Preferred stock, par value $ |
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— |
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— |
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Additional paid-in capital |
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Accumulated deficit |
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( |
) |
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( |
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Total stockholders' equity |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
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$ |
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$ |
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The Notes to Condensed Financial Statements are an integral part of these statements.
4
Table of Contents
Applied Therapeutics, Inc.
Condensed Statements of Operations
(in thousands, except share and per share data)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2025 |
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2024 |
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2025 |
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2024 |
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REVENUE: |
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Research and development services revenue |
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$ |
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$ |
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$ |
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$ |
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Total revenue |
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COSTS AND EXPENSES: |
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Research and development |
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General and administrative |
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Total costs and expenses |
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LOSS FROM OPERATIONS |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
OTHER INCOME (EXPENSE), NET: |
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Interest income |
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Change in fair value of warrant liabilities |
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( |
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Other expense |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Total other income (expense), net |
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( |
) |
|||
Net income (loss) |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
) |
|
Net income (loss) per share attributable to common stockholders - basic |
|
$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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Net income (loss) per share attributable to common stockholders - diluted |
|
$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
Weighted-average common stock outstanding - basic |
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Weighted-average common stock outstanding - diluted |
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The Notes to Condensed Financial Statements are an integral part of these statements.
5
Table of Contents
Applied Therapeutics Inc.
Condensed Statements of Stockholders’ (Deficit) Equity
(in thousands, except share and per share data)
(Unaudited)
|
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Common Stock |
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||||||||
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$ |
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Additional |
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Total |
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Par Value |
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Paid-in |
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Accumulated |
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Stockholders’ |
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Shares |
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Amount |
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Capital |
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Deficit |
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(Deficit) Equity |
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|||||
BALANCE, January 1, 2024 |
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$ |
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$ |
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$ |
( |
) |
|
$ |
( |
) |
|||
Issuance of common stock and prefunded warrants, net of issuance costs of $ |
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— |
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||||
Exercise of common warrants |
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— |
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Exercise of prefunded warrants |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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|||
Restricted Stock Units released for common stock issued under Equity Incentive Plan |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
|
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— |
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— |
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— |
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|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
BALANCE, March 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Exercise of stock options |
|
|
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|
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— |
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|
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— |
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|||
Restricted Stock Units released for common stock issued under Equity Incentive Plan |
|
|
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|
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— |
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— |
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|
|
— |
|
|
|
— |
|
|
Stock-based compensation expense |
|
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— |
|
|
|
— |
|
|
|
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|
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— |
|
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||
Net income |
|
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— |
|
|
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— |
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— |
|
|
|
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|
||
BALANCE, June 30, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
6
Table of Contents
Applied Therapeutics Inc.
Condensed Statements of Stockholders’ Equity
(in thousands, except share and per share data)
(Unaudited)
|
|
Common Stock |
|
|
|
|
|
|
|
|
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|
||||||||
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$ |
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Additional |
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Total |
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||||||||
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Par Value |
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Paid-in |
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Accumulated |
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Stockholders’ |
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||||||||
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Shares |
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Amount |
|
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Capital |
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Deficit |
|
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Equity |
|
|||||
BALANCE, January 1, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Exercise of pre-funded warrants |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Restricted Stock Units released for common stock issued under Equity Incentive Plan |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
BALANCE, March 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Restricted Stock Units released for common stock issued under Equity Incentive Plan |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
BALANCE, June 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
7
Table of Contents
Applied Therapeutics, Inc.
Condensed Statements of Cash Flows
(in thousands)
(Unaudited)
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
OPERATING ACTIVITIES: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Stock-based compensation expense |
|
|
|
|
|
|
||
Amortization of insurance premium |
|
|
|
|
|
|
||
Amortization of operating lease right-of-use assets |
|
|
|
|
|
|
||
Amortization of leasehold improvements |
|
|
|
|
|
|
||
Change in operating lease liability |
|
|
( |
) |
|
|
( |
) |
Change in fair value of warrant liabilities |
|
|
( |
) |
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Prepaid expenses |
|
|
|
|
|
( |
) |
|
Accounts payable |
|
|
|
|
|
|
||
Accrued expenses and other current liabilities |
|
|
( |
) |
|
|
( |
) |
Other liabilities |
|
|
|
|
|
( |
) |
|
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
INVESTING ACTIVITIES: |
|
|
|
|
|
|
||
Net cash provided by investing activities |
|
|
|
|
|
|
||
FINANCING ACTIVITIES: |
|
|
|
|
|
|
||
Proceeds from issuance of common stock and pre-funded warrants, net of issuance costs |
|
|
|
|
|
|
||
Repayments of short-term borrowings |
|
|
|
|
|
( |
) |
|
Exercise of common warrants |
|
|
|
|
|
|
||
Exercise of stock options |
|
|
|
|
|
|
||
Net cash provided by financing activities |
|
|
|
|
|
|
||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
( |
) |
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents at end of period |
|
$ |
|
|
$ |
|
||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
||
Conversion of warrant liabilities to equity for warrant exercises |
|
$ |
|
|
$ |
|
||
The Notes to Condensed Financial Statements are an integral part of these statements.
8
Table of Contents
Applied Therapeutics, Inc.
Notes to Condensed Financial Statements (Unaudited)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations and Business
Applied Therapeutics, Inc. (the “Company”) is a clinical-stage biopharmaceutical company committed to the development of novel product candidates against validated molecular targets in rare diseases. In particular, the Company is currently targeting treatments for rare metabolic diseases such as Galactosemia and Sorbitol Dehydrogenase (“SORD”) deficiency, and diabetic complications including diabetic cardiomyopathy. The Company was incorporated in Delaware on January 20, 2016 and is headquartered in New York, New York.
The accompanying unaudited condensed financial statements have been prepared by the Company in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2024, included in the Annual Report on Form 10-K, filed with the SEC on April 15, 2025 (the “Annual Report”).
The unaudited condensed financial statements have been prepared on the same basis as the audited financial statements. In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments which are necessary for a fair presentation of the Company’s financial position as of June 30, 2025, results of operations for the three and six months ended June 30, 2025 and 2024 and cash flows for the six months ended June 30, 2025 and 2024. Such adjustments are of a normal and recurring nature. The results of operations for the three and six months ended June 30, 2025, are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2025. Certain reclassifications have been made to prior period financial statements to conform to the current period presentation.
Liquidity and Going Concern
Under ASC Topic 205-40, Presentation of Financial Statements - Going Concern, management is required at each reporting period to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about an entity's ability to continue as a going concern within one year after the date that the financial statements are issued. In making its assessment, management considered the Company’s current financial condition and liquidity sources including current funds available, forecasted future cash flows and condition and unconditional obligations due over the next twelve months. The Company continues to actively pursue several potential long-term financing options, including equity capital, debt, convertible debt, and synthetic royalty financing. Additionally, the Company is in active dialogue with several potential partners regarding business development opportunities related to one or more of its programs. There can be no assurances that the Company’s discussions with any of the current counterparties will be successful, and the Company expects to continue to pursue additional opportunities.
As reflected in the accompanying unaudited condensed financial statements, the Company incurred a net loss of $
9
Table of Contents
to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
Risks and Uncertainties
The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations and reliance on third-party manufacturers.
Segment Information
The Company operates in
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the Company's ability to continue as a going concern as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. In preparing the financial statements, management used estimates in the following areas, among others: prepaid and accrued expenses; warrant liabilities valuation; research and development services revenue; stock-based compensation expense; the likelihood of realization of deferred tax assets; and the evaluation of the existence of conditions and events that raise substantial doubt regarding the Company’s ability to continue as a going concern. Actual results could differ from those estimates.
Significant Accounting Policies
The significant accounting policies and estimates used in preparation of the unaudited condensed financial statements are described in the Company’s audited financial statements as of and for the year ended December 31, 2024, and the notes thereto, which are included in the Annual Report. There have been no material changes to the Company’s significant accounting policies during the three and six months ended June 30, 2025.
Recent Accounting Pronouncements
Any recent pronouncements issued by the FASB or other authoritative standards groups with future effective dates are either not applicable or are not expected to be significant to the financial statements of the Company.
2. LICENSE AGREEMENT
Columbia University
In October 2016, the Company entered into a license agreement (the “2016 Columbia Agreement”) with the Trustees of Columbia University (“Columbia University”) to obtain an exclusive royalty-bearing sublicensable license in respect to certain patents. As part of the consideration for entering into the 2016 Columbia Agreement, the Company issued to Columbia University shares equal to
10
Table of Contents
make further payments to Columbia University of up to an aggregate of $
The 2016 Columbia Agreement will terminate upon the expiration of all the Company’s royalty payment obligations in all countries. The Company may terminate the 2016 Columbia Agreement for convenience upon
In January 2019, the Company entered into a second license agreement with Columbia University (the “2019 Columbia Agreement”). Pursuant to the 2019 Columbia Agreement, Columbia University granted the Company a royalty-bearing, sublicensable license that is exclusive with respect to certain patents, and non-exclusive with respect to certain know-how, in each case to develop, manufacture and commercialize PI3k inhibitor products. The license grant is worldwide. Under the 2019 Columbia Agreement, the Company is obligated to use commercially reasonable efforts to research, discover, develop and market licensed products for commercial sale in the licensed territory, and to comply with certain obligations to meet specified development and funding milestones within defined time periods. Columbia University retains the right to conduct, and grant third parties the right to conduct, non-clinical academic research using the licensed technology; provided that such research is not funded by a commercial entity or for-profit entity or results in rights granted to a commercial or for-profit entity. As consideration for entering into the 2019 Columbia Agreement, the Company made a nominal upfront payment to Columbia University. The Company will be required to make further payments to Columbia University of up to an aggregate of $
In July 2022, following regulatory changes impacting development of the class of PI3k inhibitors and the Company’s decision to discontinue its early stage preclinical PI3k program, the Company and Columbia entered into an agreement terminating the 2019 Columbia Agreement (the “2022 Columbia Termination Agreement”) as of July 25, 2022. Under the terms of the 2022 Columbia Termination Agreement, the Company assigned certain regulatory documents regarding the preclinical PI3k inhibitor AT-104 to Columbia and granted Columbia a non-exclusive royalty free license (with rights to sublicense any future Columbia licensee) under certain know-how, technical information and data relating to AT-104 that was developed by the Company during the term of the 2019 Columbia Agreement.
In March 2019, and in connection with the 2016 Columbia Agreement, the Company entered into a research services agreement (the “2019 Columbia Research Agreement”) with Columbia University with the purpose of analyzing structural and functional changes in brain tissue in an animal model of Galactosemia, and the effects of certain compounds whose intellectual property rights were licensed to the Company as part of the 2016 Columbia Agreement on any such structural and functional changes. The 2019 Columbia Research Agreement had a term of
11
Table of Contents
On October 3, 2019, and in connection with the 2019 Columbia Agreement, the Company entered into a research services agreement (the “PI3k Columbia Research Agreement” and collectively with the 2016 Columbia Agreement, 2019 Columbia Agreement and 2019 Columbia Research Agreement, the “Columbia Agreements”) with Columbia University with the purpose of analyzing PI3k inhibitors for the treatment of lymphoid malignancies. The PI3k Columbia Research Agreement had a term of
During the three and six months ended June 30, 2025, the Company recorded $
As of June 30, 2025 and December 31, 2024, the Company had $
University of Miami
2020 Miami License Agreement
On October 28, 2020, the Company entered into a license agreement with the University of Miami (the “2020 Miami License Agreement”) relating to certain technology that is co-owned by the University of Miami ("UM"), the University of Rochester ("UR") and University College London ("UCL"). UM was granted an exclusive agency from UR and UCL to license each of their rights in the technology. Pursuant to the 2020 Miami License Agreement, UM, on behalf of itself and UR and UCL, granted the Company a royalty-bearing, sublicensable license that is exclusive with respect to certain patent applications and patents that may grant from the applications, and non-exclusive with respect to certain know-how, in each case to research, develop, make, have made, use, sell and import products for use in treating and/or detecting certain inherited neuropathies, in particular those caused by mutation in the sorbitol dehydrogenase ("SORD") gene. The license grant is worldwide. Under the 2020 Miami License Agreement, the Company is obligated to use commercially reasonable efforts to develop, manufacture, market and sell licensed products in the licensed territory, and to comply with certain obligations to meet specified development milestones within defined time periods. UM retains for itself, UR, and UCL the right to use the licensed patent rights and licensed technology for their internal non-commercial educational, research and clinical patient care purposes, including in sponsored research and collaboration with commercial entities.
Under the terms of the 2020 Miami License Agreement, the Company was obligated to pay UM an up-front non-refundable license fee of $
The 2020 Miami License Agreement terminates upon the expiration of all issued patents and filed patent applications or
During the three and six months ended June 30, 2025, the Company recorded $
12
Table of Contents
As of June 30, 2025 and December 31, 2024, the Company had $
2020 Miami Option Agreement
On October 28, 2020, the Company entered into an option agreement with the University of Miami (the “2020 Miami Option Agreement”) concerning certain research activities and technology relating to SORD neuropathy that may be pursued and developed by UM. Under the 2020 Miami Option Agreement, if UM conducts such research activities, then UM is obligated to grant us certain option rights to access and use the research results and to obtain licenses to any associated patent rights upon us making specified payments to UM within specified time limits. If the Company elects to obtain option rights the Company will be required to make payments to UM in the low-six figures to the low-seven figures, depending upon the rights the Company elects to obtain, and the Company will be obligated to make certain milestone payments in the high-six figures to mid-seven figures if UM conducts and completes certain research activities within specified time periods and the Company elects to receive rights to use the results of that research.
During the three and six months ended June 30, 2025 and 2024, the Company recorded
As of June 30, 2025 and December 31, 2024, there were
Bayh-Dole Act
Some of the intellectual property rights the Company has licensed, including certain rights licensed in the agreements described above, may have been generated through the use of U.S. government funding. As a result, the U.S. government may have certain rights to intellectual property embodied in the Company’s current or future product candidates under the Bayh-Dole Act of 1980, or Bayh-Dole Act, including the grant to the government of a non-exclusive, worldwide, freedom to operate license under any patents, and the requirement, absent a waiver, to manufacture products substantially in the United States. To the extent any of the Company’s current or future intellectual property is generated through the use of U.S. government funding, the provisions of the Bayh-Dole Act may similarly apply.
3. FAIR VALUE MEASUREMENTS
The following tables summarize, as of June 30, 2025, the Company’s financial assets and liabilities that are measured at fair value on a recurring basis, according to the fair value hierarchy described in the significant accounting policies in the Company’s audited financial statements as of and for the year ended December 31, 2024, and the notes thereto, which are included in the Annual Report.
|
|
As of |
|
|||||||||||||
|
|
June 30, 2025 |
|
|||||||||||||
(in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Cash |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Money market funds |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total cash and cash equivalents |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Total financial assets measured at fair value on a recurring basis |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Warrant liabilities - common warrants |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total financial liabilities measured at fair value on a recurring basis |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
13
Table of Contents
The following tables summarize, as of December 31, 2024, the Company’s financial assets and liabilities that are measured at fair value on a recurring basis.
|
|
As of |
|
|||||||||||||
|
|
December 31, 2024 |
|
|||||||||||||
(in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Cash |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Money market funds |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total cash and cash equivalents |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Total financial assets measured at fair value on a recurring basis |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Warrant liabilities - Common Warrants |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total financial liabilities measured at fair value on a recurring basis |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
On June 27, 2022, the Company issued
The Common Warrants were remeasured using a Black-Scholes option pricing model with a range of assumptions included below as of June 30, 2025 and December 31, 2024.
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Expected term (in years) |
|
|
|
|
|
|
||
Volatility |
|
|
% |
|
|
% |
||
Risk-free interest rate |
|
|
% |
|
|
% |
||
Dividend yield |
|
|
% |
|
|
% |
||
As of June 30, 2025, the Company utilized a probability-weighted approach that considered the probability of a change in control at the Company in the Black-Scholes option pricing model, whereby a
As of December 31, 2024 the Company utilized a probability-weighted approach that considered the probability of a change in control at the Company in the Black-Scholes option pricing model, whereby a
The following table provides a roll forward of the aggregate fair values of the Company’s warrant liability, for which fair value is determined using Level 3 inputs (in thousands):
|
|
Warrant |
|
|
Balance as of December 31, 2024 |
|
$ |
|
|
Change in fair value |
|
|
( |
) |
Balance as of June 30, 2025 |
|
$ |
|
|
14
Table of Contents
The inputs utilized by management to value the warrant liabilities are highly subjective. The assumptions used in calculating the fair value of the warrant liabilities represent the Company’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the fair value of the warrant liability for Common Warrants may be materially different in the future.
4. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Prepaid research and development expenses |
|
$ |
|
|
$ |
|
||
Prepaid manufacturing costs |
|
|
|
|
|
|
||
Prepaid insurance expenses |
|
|
|
|
|
|
||
Prepaid commercial and patient advocacy |
|
|
|
|
|
|
||
Other prepaid expenses and current assets |
|
|
|
|
|
|
||
Total prepaid expenses & other current assets |
|
$ |
|
|
$ |
|
||
5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
||
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Accrued pre-clinical and clinical expenses |
|
$ |
|
|
$ |
|
||
Deferred revenue |
|
|
|
|
|
|
||
Accrued professional fees |
|
|
|
|
|
|
||
Accrued compensation and benefits |
|
|
|
|
|
|
||
Accrued commercial expenses |
|
|
|
|
|
|
||
Accrued patent expenses |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total accrued expenses & other current liabilities |
|
$ |
|
|
$ |
|
||
6. STOCK‑BASED COMPENSATION
Equity Incentive Plans
In 2016, the Company's board of directors (the "Board") adopted, and its stockholders approved, the 2016 Equity Incentive Plan, as amended (the "2016 Plan"), which provides for the granting of options at the discretion of the Board or any subcommittee of the Board to its employees, officers and independent contractors. Under the terms of the 2016 Plan, options may not be granted at an exercise price less than fair market value of the Company's common stock on the date of the grant.
In May 2019, the Company’s Board adopted the 2019 Equity Incentive Plan (“2019 Plan”), which was subsequently approved by its stockholders and became effective on May 13, 2019. As a result, no additional awards under the 2016 Plan will be granted and all outstanding stock awards granted under the 2016 Plan that are repurchased, forfeited, expired, or are cancelled will become available for grant under the 2019 Plan in accordance with its terms. The 2016 Plan will continue to govern outstanding equity awards granted thereunder.
15
Table of Contents
The 2019 Plan provides for the issuance of incentive stock options (“ISOs”) to employees, and for the grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards and other forms of stock awards to the Company’s employees, officers, and directors, as well as non- employees, consultants, and affiliates to the Company. Under the terms of the 2019 Plan, stock options may not be granted at an exercise price less than fair market value of the Company’s common stock on the date of the grant. The 2019 Plan is administered by the Compensation Committee of the Board.
Initially, subject to adjustments as provided in the 2019 Plan, the maximum number of the Company’s common stock that may be issued under the 2019 Plan is
As of June 30, 2025, there were
Stock-Based Compensation Expense
Total stock‑based compensation expense recorded for employees, directors and non‑employees:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Stock Option Activity
During the six months ended June 30, 2025, the Company granted
16
Table of Contents
The following table summarizes the information about options outstanding at June 30, 2025:
|
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
|
||||
|
|
|
|
|
Weighted- |
|
|
Remaining |
|
|
|
|
||||
|
|
|
|
|
Average |
|
|
Contractual |
|
|
Aggregate |
|
||||
|
|
Options |
|
|
Exercise |
|
|
Term (in |
|
|
Intrinsic |
|
||||
Outstanding at December 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options exercised |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding at June 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercisable at June 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Nonvested at June 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The aggregate intrinsic value is calculated as the difference between the exercise price of all outstanding and exercisable stock options and the fair value of the Company’s common stock at June 30, 2025. The intrinsic value of stock options exercised during each of the three and six months ended June 30, 2024 was $
Valuation of Stock Options Granted
The fair value of each option award granted is estimated on the date of the grant using the Black-Scholes option valuation model based on the weighted-average assumptions noted in the table below for those options granted in the three and six months ended June 30, 2025. There were no options granted for the three and six months ended June 30, 2024.
|
|
Three Months Ended |
|
Six months ended |
|
|
June 30, |
|
June 30, |
|
|
2025 |
|
2025 |
Expected term (in years) |
|
|
||
Volatility |
|
|
||
Risk-free interest rate |
|
|
||
Dividend yield |
|
|
Restricted Stock Unit Activity
During the six months ended June 30, 2025, the Company granted
17
Table of Contents
The following table summarizes the information about restricted stock units outstanding at June 30, 2025:
|
|
|
|
|
Weighted-Average |
|
||
|
|
|
|
|
Grant Date |
|
||
|
|
Shares |
|
|
Fair Value |
|
||
Outstanding at December 31, 2024 |
|
|
|
|
$ |
|
||
Awarded |
|
|
|
|
|
|
||
Released |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding at June 30, 2025 |
|
|
|
|
$ |
|
||
Nonvested at June 30, 2025 |
|
|
|
|
$ |
|
||
2019 Employee Stock Purchase Plan
In May 2019, the Company’s Board and its stockholders approved the 2019 Employee Stock Purchase Plan (the “ESPP”), which became effective as of May 13, 2019. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the U.S. Internal Revenue Code of 1986, as amended. The number of shares of common stock initially reserved for issuance under the ESPP was
Under the ESPP substantially all employees may voluntarily enroll to purchase shares of the Company’s common stock through payroll deductions at a price equal to
Valuation of ESPP Granted to Employees
The fair value of each ESPP award is estimated on the date of the grant using the Black-Scholes valuation model based on the weighted-average assumptions. There were
7. STOCKHOLDERS’ EQUITY
As of June 30, 2025, and December 31, 2024, the authorized capital stock of the Company consisted of 250,000,000 0.0001 10,000,000 0.0001
Common Stock
June 2022 Offering
On June 27, 2022, the Company completed the June 2022 Offering, an underwritten public offering of
18
Table of Contents
were offered at a price to the public of $
Leerink ATM Agreement
On August 11, 2023, the Company entered into an ATM Agreement with Leerink Partners LLC (the "Leerink ATM Agreement"), pursuant to which the Company may offer and sell, from time to time, shares of common stock having an aggregate offering price of up to $
There were
As of June 30, 2025, the Company has sold an aggregate of
March 2024 Private Placement
On March 1, 2024, the Company completed its sale of a total of
The Pre-Funded Warrants are immediately exercisable from the date of issuance and do not have an expiration date. They have an exercise price of $
19
Table of Contents
event of certain corporate transactions, the holders of the Pre-Funded Warrants will be entitled to receive, upon exercise of the Pre-Funded Warrants, the kind and amount of securities, cash or other property that the holders would have received had they exercised the Pre-Funded Warrants immediately prior to such transaction. The Pre-Funded Warrants do not entitle the holders thereof to any voting rights or any of the other rights or privileges to which holders of common stock are entitled.
8. WARRANTS
Warrants Issued with June 2022 Offering
On June 27, 2022, in connection with the sale and issuance common stock as part of the June Offering, the Company issued
The June 2022 Pre-Funded Warrants were initially recorded at fair value as a liability as the Company could be required to settle the Pre-Funded Warrants in cash in the event of an acquisition of the Company under certain circumstances. In December 2022, the Company amended the Pre-Funded Warrants to remove the potential requirement that they could be settled in cash under certain circumstances. Beginning December 31, 2022, the Pre-Funded Warrants are recorded as equity, using their fair value as of the amendment date.
As of June 30, 2025, warrant holders had exercised
As of June 30, 2025, the Company had
The Common Warrants were accounted for as liabilities under ASC 815-40, as these warrants provide for a settlement provision that does not meet the requirements of the indexation guidance under ASC 815-40. These warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within the statements of operations. The Common Warrants were remeasured using a Black-Scholes option pricing model with a range of assumptions as of June 30, 2025 and December 31, 2024 (See Note 3).
As of June 30, 2025, warrant holders had exercised
As of June 30, 2025, the Company had
Warrants Issued with March 2024 Private Placement
On March 1, 2024, in connection with the sale and issuance of common stock as part of the March 2024 Private Placement, the Company issued
20
Table of Contents
As of June 30, 2025, the Company had
A summary of the Company’s outstanding warrants as of June 30, 2025 is as follows:
|
|
Equity Classified |
|
|
Liability Classified |
|
|
Total |
|
|||
|
|
Warrants |
|
|
Warrants |
|
|
Warrants |
|
|||
Outstanding as of December 31, 2024 |
|
|
|
|
|
|
|
|
|
|||
Warrants granted and issued |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Warrants exercised |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Outstanding as of June 30, 2025 |
|
|
|
|
|
|
|
|
|
|||
9. LEASES
The following table summarizes the Company’s lease related costs for the three and six months ended June 30, 2025 and 2024:
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
(in thousands) |
|
|
|
June 30, |
|
|
June 30, |
|
||||||||||
Lease Cost |
|
Statement of Operations Location |
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Operating Lease Cost |
|
General and administrative |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total lease cost |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Average lease terms and discount rates for the Company’s operating leases were as follows:
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|
June 30, |
|
||
Other Information |
|
2025 |
|
|
2024 |
|
||
Weighted-average remaining lease term |
|
|
|
|
|
|
||
Operating leases |
|
|
|
|
||||
Weighted-average discount rate |
|
|
|
|
|
|
||
Operating leases |
|
|
% |
|
|
% |
||
The following table summarizes the maturities of lease liabilities as of June 30, 2025:
|
|
Operating |
|
|
Year |
|
(in thousands) |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Total lease payments |
|
|
|
|
Less: interest |
|
|
|
|
Total lease liabilities |
|
$ |
|
|
21
Table of Contents
10. INCOME TAXES
During the six months ended June 30, 2025 and the year ended December 31, 2024, the Company recorded a full valuation allowance on federal and state deferred tax assets since management does not forecast the Company to be in a profitable position in the near future.
11. BENEFIT PLANS
The Company established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code in 2018. This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre‑tax basis. Matching contributions to the plan may be made at the discretion of the Company’s Board. The Company made approximately $0.1 million and $0.4 million, respectively, in matching contributions to the plan during each of the three and six months ended June 30, 2025. The Company made approximately $0.2
12. NET LOSS PER COMMON SHARE
Basic net loss per common share is computed by dividing the net loss available to common stockholders by the weighted‑average number of shares of common stock outstanding during the period, which includes shares issuable under pre-funded warrants agreements for little consideration.
Diluted net loss per common share is computed by giving the effect of all potential shares of common stock, including stock options, preferred shares, warrants and instruments convertible into common stock, to the extent dilutive. Basic and diluted net loss per common share was the same for the three months ended June 30, 2025 and the six months ended June 30, 2025 and 2024, as the inclusion of all potential common shares outstanding would have been anti‑dilutive due to net losses incurred.
The following table sets forth the computation of basic and diluted net loss per common share (in thousands, except share and per share data):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Numerator: |
|
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Net income (loss) - basic |
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Less: change in fair value of warrant liabilities |
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Net loss - diluted |
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Weighted-average common stock outstanding - basic |
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Add: warrant liabiliy conversion shares |
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Net loss per share attributable to common stockholders - basic |
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Net loss per share attributable to common stockholders - diluted |
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The Company excluded the following potential common shares, presented based on amounts outstanding as of June 30, 2025 and 2024, from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti‑dilutive effect:
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13. RELATED PARTIES
In December 2018, the Company entered into an agreement (the “LaunchLabs Agreement”) with ARE‑LaunchLabs NYC LLC (“Alexandria LaunchLabs”), a subsidiary of Alexandria AG真人官方 Estate Equities, Inc. for use of specified premises within the Alexandria LaunchLabs space on a month-to-month basis. A shareholder and former member of the Company’s Board is the founder and executive chairman of Alexandria AG真人官方 Estate Equities, Inc. During the three and six months ended June 30, 2025, the Company made payments to Alexandria LaunchLabs of approximately $
As of June 30, 2025, there were
14. REVENUE
On January 3, 2023, the Company entered into the Advanz Agreement with Advanz Pharma. Pursuant to the Advanz Agreement, the Company granted Advanz Pharma the exclusive right and license to commercialize drug products containing AT-007 (also known as govorestat), the Company's proprietary Aldose Reductase Inhibitor (the “Licensed Product”), for use in treatment of Sorbitol Dehydrogenase Deficiency (“SORD”) and Galactosemia (each a “Licensed Indication”) in the European Economic Area, Switzerland and the United Kingdom (the “Territory”). The Agreement provides that the Company will perform research and development services prior to and subsequent to marketing authorization and manufacture and supply product for Advanz Pharma. The Company also granted Advanz Pharma a right of negotiation and “most-favored nation” rights with respect to acquiring the European commercialization rights for any additional indications for which the Licensed Product may be developed in the future (or any other products we may develop solely to the extent used for the Licensed Indications).
Advanz Pharma is required to use commercially reasonable efforts to launch and commercialize the Licensed Products in the major markets in the Territory in each Licensed Indication following, and subject to, receipt of marketing authorization therein. Under the Advanz Agreement, Advanz Pharma agreed to pay the Company (i) an upfront payment of EUR
23
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In accordance with the Company's ASC 606 assessment, Advanz Pharma is considered to be a customer. The Company identified
At inception of the Advanz Agreement, the Company determined the estimate of standalone selling price for the license performance obligation by using the adjusted market assessment approach. Under this method, the Company forecasted and analyzed Galactosemia and SORD in the European market, the probability of marketing authorization approval as well as considered recent similar license arrangements within the same phase of clinical development, therapeutic area, type of agreement, forecasted sales for the contract period, probability of success and a market discount rate. To estimate the standalone selling price of the research and development services, the Company forecasted its expected costs of satisfying that performance obligation and added an appropriate margin for that service. To estimate the standalone selling price for the manufacturing supply agreement material right, the Company utilized an adjusted market assessment approach. The Company analyzed the discount Advanz Pharma is expected to obtain by estimating the material right the customer is receiving for the future purchase of manufacturing and supply services. This estimation utilized the estimated number of patients to be treated per year in the Territory; the estimated volume of bottles per patient required per year; typical margin; probability of success; and discounted at market rate.
The Company allocated the total transaction price to each performance obligation on a relative standalone selling price basis and determined whether revenue should be recognized at a point in time or over time. The Company allocated $
Revenue should be recognized when, or as, an entity satisfies a performance obligation by transferring a promised good or service to a customer, i.e., when the customer obtains control of the good or service. The license granted to Advanz Pharma is being accounted for as a distinct performance obligation. The Advanz Pharma license relates to functional IP for which revenue is recognized at a point in time – in the case of this license agreement, the point in time is at inception of the contract because the customer obtained control of the license and was able to use and benefit from its right to use the intellectual property at that point.
The research and development services performance obligation under the Advanz Agreement represents a separate performance obligation. The research and development services were provided to Advanz Pharma by the Company from inception of the agreement in January 2023 and will continue through completion of post marketing authorization approval studies. Revenue related to the research and development services performance obligation was recognized as services were performed based on the costs incurred through June 30, 2025, as a percentage of the estimated total costs to be incurred for this performance obligation. The Company recognized
The manufacturing supply agreement material right performance obligation provided to Advanz Pharma by the Company resulted in an allocation of the transaction price and resulting deferred revenue as of contract inception and June 30, 2025 and December 31, 2024, of approximately $
15. COMMITMENTS AND CONTINGENCIES
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The Company is involved in various lawsuits, claims and other legal matters from time to time that arise in the ordinary course of conducting business. The Company records a liability when a particular contingency is probable and estimable.
Securities Class Action Litigation
On December 17, 2024, a purported stockholder filed a putative class action lawsuit against the Company and certain current and former Company officers and directors in the United States District Court for the Southern District of New York (Alexandru v. Applied Therapeutics, Inc., et al., No. 1:24-cv-09715). The complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 10b-5 promulgated thereunder by making false and/or misleading statements between January 3, 2024 to December 2, 2024 in connection with the Company’s NDA to the FDA for govorestat for the treatment of Classic Galactosemia, and seeks unspecified damages. On December 27, 2024, another purported stockholder filed a putative class action lawsuit against the Company and a former Company officer and director in the United States District Court for the Southern District of New York (Ikram v. Applied Therapeutics, Inc., et al., No. 1:24-cv-09973). The complaint alleges claims substantially similar to those alleged in the Alexandru action and also seeks unspecified damages. On February 18, 2025, several purported stockholders filed motions seeking to consolidate the Alexandru and Ikram actions and seeking appointment as lead plaintiff in the consolidated action. On March 11, 2025, the court consolidated the Alexandru and Ikram actions (In re Applied Therapeutics Securities Litigation, No. 1:24-cv-9715) and appointed a lead plaintiff and lead counsel. On May 2, 2025, lead plaintiff filed a consolidated amended complaint. On May 23, 2025, the Company filed an answer to the consolidated amended complaint and the individual defendants filed motions to dismiss. On June 13, 2025, lead plaintiff filed a second amended complaint and the Court issued a scheduling order setting deadlines for pretrial proceedings, including discovery. On June 27, 2025, the Company filed an answer to the second amended complaint and the individual defendants filed motions to dismiss. Briefing on the motions to dismiss concluded on July 18, 2025, and the motions remain pending.
Shareholder Derivative Litigation
On January 31, 2025, a purported stockholder filed a derivative action in the United States District Court for the Southern District of New York (Hassine v. Shendelman, et al., No. 1:25-cv-00935). The complaint purports to assert derivative claims against certain current and former Company officers and directors for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, violations of Section 14(a) of the Exchange Act, and contribution under Sections 10(b) and 21D of the Exchange Act. The complaint seeks to implement reforms to the Company’s corporate governance and internal procedures and to recover on behalf of the Company for any liability the Company might incur as a result of the individual defendants’ alleged misconduct, as well as declaratory, equitable, and monetary relief, including attorneys’ fees and other costs. The derivative action is based substantially on the same facts alleged in the consolidated action described above. On March 4, 2025, plaintiff and the Company filed a joint stipulation seeking to temporarily stay the derivative action. On March 5, 2025, the court so-ordered the stipulation, thereby temporarily staying the derivative action.
As of June 30, 2025, the Company determined the probability of loss on the aforementioned lawsuits was reasonably possible; however, the Company has not recorded a liability, since the Company is not currently able to estimate the amount or range of loss, if any, at this stage of the litigation.
16. SUBSEQUENT EVENTS
On July 31, 2025, the Company entered into an out-licensing agreement with Biossil, Inc. ("Biossil") for AT-001, the Company’s investigational, novel Aldose Reductase Inhibitor developed as an oral therapy for the treatment of Diabetic Cardiomyopathy. Under the terms of the agreement, Biossil will gain exclusive worldwide rights to develop and commercialize AT-001. In exchange, the Company received an upfront payment of $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following information should be read in conjunction with the unaudited condensed financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10‑Q and the audited financial statements and the related notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2024 (the “Annual Report”). In addition, this discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described under “Special Note Regarding Forward-Looking Statements” and under “Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q, and in other reports we file with the Securities and Exchange Commission (the “SEC”), that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a clinical‑stage biopharmaceutical company committed to the development of novel product candidates against validated molecular targets in rare diseases. We focus on previously identified disease processes where other molecules have failed to yield successful products due to their poor efficacy and/or tolerability. Our unique approach to drug development leverages recent technological advances to design improved drugs, employs early use of biomarkers to confirm biological activity and focuses on potentially accelerated regulatory pathways. Our first molecular target is aldose reductase ("AR"), an enzyme that converts glucose to sorbitol and galactose to galactitol and is implicated in multiple diseases. Prior attempts to inhibit this enzyme were hindered by nonselective, nonspecific inhibition, which resulted in limited efficacy and significant off‑target safety effects. The detrimental consequences of AR activation have been well established by decades of prior research. Our AR program currently includes multiple potent and selective inhibitors of AR, which are engineered to have specific tissue permeability profiles to target different disease states, including diabetic complications, rare metabolic diseases and rare neurologic diseases. The result of this multifaceted approach to drug development is a portfolio of highly specific and selective product candidates that we believe may be able to move quickly through the development process.
Our lead candidate, AT‑007 (also called govorestat) is a novel central nervous system, ("CNS"), penetrant aldose reductase inhibitor ("ARI") that we are developing for the treatment of rare diseases, including Classic Galactosemia and Charcot-Marie-Tooth Sorbitol Dehydrogenase ("SORD") Deficiency ("CMT-SORD"). Classic Galactosemia is a devastating rare pediatric metabolic disease that affects how the body processes a simple sugar called galactose, and for which there is no known cure or approved treatment available. CMT-SORD is a rare, progressive, neuromuscular disease caused by genetic mutations in the SORD enzyme. The U.S. Food and Drug Administration (the "FDA"), has granted both orphan drug designation and rare pediatric disease designation to AT-007 for the treatment of Classic Galactosemia and orphan drug designation for the treatment of CMT-SORD.
We submitted a New Drug Application ("NDA") in December 2023 to the FDA, and the FDA accepted the filing of the NDA for govorestat (AT-007) for the treatment of Classic Galactosemia in February 2024. On November 27, 2024, the FDA issued a Complete Response Letter ("Complete Response Letter") for the NDA for the treatment of Classic Galactosemia, indicating that the agency was unable to approve the NDA in its current form, citing deficiencies in the clinical application. On the same day, the FDA also issued warning letters to both us and a clinical investigator ("Warning Letter" and the "Clinical Investigator Warning Letter", respectively) related to the Phase 2/3, ACTION-Galactosemia Kids study. Following receipt of the Complete Response Letter, we also withdrew a pending Marketing Authorization Application ("MAA") to the European Medicines Agency (the "EMA") for AT-007 for the treatment of Classic Galactosemia, as we believed more time was needed to acquire further data to support a European MAA. We are actively working to address the issues raised in the Complete Response Letter and Warning Letter.
We are also studying AT-007 in CMT-SORD. AR is the first enzyme in the polyol pathway, converting glucose to sorbitol. AR is then followed by SORD, which converts sorbitol to fructose. Patients with CMT-SORD accumulate very high levels of sorbitol in their cells and tissues as a result of the enzyme deficiency, which is thought to result in tissue toxicities such as peripheral neuropathy and motor neuron disease. Recent research in Drosophila and cell models of CMT-SORD demonstrated that treatment with an ARI that blocks sorbitol production may provide benefit in this disease. Preclinical studies on AT-007 have demonstrated significant reduction in sorbitol levels in fibroblasts from SORD deficient patients. Treatment with AT-007 in the Drosophila model of SORD prevented the disease phenotype
26
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and protected from neuronal degeneration. On October 25, 2021, we reported data from a pilot open-label study in eight CMT-SORD patients. AT-007 reduced blood sorbitol levels by approximately 66% from baseline through 30 days of treatment. AT-007 was generally safe and well tolerated in treated patients. In December 2021, we initiated a Phase 2/3 study in patients with CMT-SORD. In July 2024, we concluded the double-blind placebo-controlled portion of the Phase 2/3 INSPIRE trial and began transitioning patients to the open-label treatment phase prior to all patients completing 24 months of treatment. On May 18, 2025, at the Peripheral Nerve Society 2025 Annual Meeting, we presented full 12-month clinical data from the INSPIRE Phase 3 trial of AT-007 in addition to new topline 18-month and 24-month data from patients prior to the open-label extension study. We are continuing to analyze the data from the Phase 2/3 INSPIRE trial and the extent to which these data may support a potential submission for regulatory approval, including under the accelerated approval pathway. Following communication with the FDA, we plan to meet with the FDA in the third quarter of 2025 regarding a potential NDA submission for govorestat for the treatment of CMT-SORD.
We have initiated a clinical development program on AT-007 in another rare pediatric disease, called Phosphomannomutase 2 ("PMM2")-congenital disorder of glycosylation ("PMM2-CDG"). PMM2-CDG is a glycosylation disorder caused by deficiencies in the enzyme PMM2, which leads to CNS symptoms, including low IQ, tremor, and speech and motor problems. Additionally, PMM2-CDG results in 20% mortality within the first four years of life. AR is over-activated in this disease as a compensatory consequence of PMM2 deficiency, and a CNS penetrant ARI may be a compelling clinical option. Initial data in fibroblast cell lines derived from PMM2-CDG patients demonstrates that AT-007 treatment increases phosphomannomutase 2 activity. The FDA has granted rare pediatric disease designation and orphan designation for AT-007 in PMM2-CDG.
AT‑001 (also called caficrestat) is a novel ARI with broad systemic exposure and peripheral nerve permeability that we are developing for the treatment of diabetic cardiomyopathy ("DbCM"), a fatal fibrosis of the heart, for which no treatments are available. We completed a Phase 1/2 clinical trial evaluating AT‑001 in approximately 120 patients with type 2 diabetes, in which no drug‑related adverse effects or tolerability issues were observed. In September 2019, we announced the initiation of a Phase 2/3 trial of AT-001 in DbCM. The study, called ARISE-HF, was designed to evaluate AT-001’s ability to improve or prevent the decline of functional capacity in patients with DbCM at high risk of progression to overt heart failure. Although we did experience enrollment delays in 2020 associated with the Covid-19 pandemic, modifications were made to the trial to include additional sites and geographies to address Covid-19-related issues. On January 4, 2024, we reported topline results from the ARISE-HF study. AT-001 (caficrestat) demonstrated a strong trend in stabilizing cardiac functional capacity, while the placebo group declined over 15 months. The placebo-treated group declined by a mean of -0.31 ml/kg/min over 15 months of treatment, while the AT-001 1500mg twice daily treated group remained primarily stable, with a mean change of -0.01 ml/kg/min over 15 months. While a trend favored active treatment, the difference between active and placebo treated groups (0.30 ml/kg/min) was not statistically significant (p=0.210). Approximately 38% of study subjects were on SGLT2 or GLP-1 therapies for treatment of diabetes, while 62% were not. In a pre-specified subgroup analysis of the primary endpoint in patients not concomitantly treated with SGLT2 or GLP-1 therapies, the placebo group declined by a mean of -0.54 ml/kg/min, while the 1500mg BID AT-001 treated group improved by a mean of 0.08 ml/kg/min over 15 months of treatment, with a difference between groups of 0.62 ml/kg/min (p=0.040). Additionally, in this subgroup analysis, the number of patients who experienced a clinically significant worsening in cardiac functional capacity of 6% or more was substantially higher in the placebo group (46%) as compared to the 1500mg BID AT-001 treated group (32.7%), odds ratio 0.56 (p=0.035). A 6% change in cardiac functional capacity has been shown to predict long-term survival and hospitalization for heart failure. The effect of AT-001 was dose dependent, with the low dose (1000mg BID) demonstrating an intermediate effect between the high dose and placebo. AT-001 was generally safe and well tolerated, with no substantial differences in serious adverse events between AT-001 treated groups as compared to placebo.
On July 31, 2025, we entered into an out-licensing agreement with Biossil, Inc. ("Biossil") for AT-001, our investigational, novel Aldose Reductase Inhibitor ("ARI") developed as an oral therapy for the treatment of Diabetic Cardiomyopathy ("DbCM"). Under the terms of the agreement, Biossil will gain exclusive worldwide rights to develop and commercialize AT-001, excluding a select number of rare disease indications. In exchange, we received an upfront payment of $1.0 million and is eligible to receive future royalties and milestone payments.
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As we advance our product candidates forward in indications such as CMT-SORD, Classic Galactosemia and PMM2-CDG, we anticipate potential moderate growth in our clinical development and operations teams to support the additional clinical trials to support the late stage indications and preparations for commercialization. AT‑003 is a novel ARI designed to cross through the back of the eye when dosed orally, and has demonstrated strong retinal penetrance, for the treatment of diabetic retinopathy ("DR"). DR is an ophthalmic disease that occurs in diabetic patients and for which treatments are currently limited to high‑cost biologics requiring intravitreal administration. DR has been linked to AR activity, including elevations in sorbitol and subsequent changes in retinal blood vessels, which distorts vision and leads to permanent blindness.
Since inception in 2016, our operations have focused on developing our product candidates, organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and conducting clinical trials. We do not have any product candidates approved for sale and have not generated any product revenue.
We have incurred significant operating losses since inception in 2016. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and commercialization of one or more of our product candidates. Our net loss was $43.2 million for the six months ended June 30, 2025. As of June 30, 2025, we had an accumulated deficit of $617.4 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future in connection with our ongoing activities. Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses. As of June 30, 2025, we had cash and cash equivalents of $30.4 million.
Leerink ATM Agreement
On August 11, 2023, we entered into the Leerink ATM Agreement with Leerink Partners LLC, pursuant to which we may offer and sell, from time to time, shares of common stock having an aggregate offering price of up to $75.0 million through Leerink Partners LLC as sales agent. Under the Leerink ATM Agreement, the sales agent may sell shares of common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended. We will pay the sales agent a commission rate of up to 3% of the gross offering proceeds of any shares sold and has agreed to provide the sales agent with indemnification and contribution against certain liabilities. The Leerink ATM Agreement contains customary representations and warranties.
As of June 30, 2025, we had sold an aggregate of 20,615,976 shares of our common stock, pursuant to the Leerink ATM Agreement with an average sale price of $3.36 per share, resulting in net proceeds of $49.3 million, after deducting commissions and offering expenses.
March 2024 Private Placement
On March 1, 2024, we completed the March 2024 Private Placement, during which we sold a total of 12,285,714 common shares, at a purchase price of $7.00 per share, and 2,000,000 Pre-Funded Warrants at a purchase price of $6.999 per Pre-Funded Warrant, in a private placement to a select group of purchasers (the “2024 Purchasers”) pursuant to a Securities Purchase Agreement (“Securities Purchase Agreement”). The March 2024 Private Placement resulted in gross proceeds to us of approximately $92.3 million, after deducting placement agent commissions and other offering expenses.
The Pre-Funded Warrants are immediately exercisable from the date of issuance and do not have an expiration date. They have an exercise price of $0.001. Holders may not exercise any Pre-Funded Warrants that would cause the aggregate number of shares of common stock beneficially owned by the holder to exceed 9.99% of our outstanding common stock immediately after exercise. The Pre-Funded Warrants are subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock and also upon any distributions for no consideration of assets to our stockholders. In the event of certain corporate transactions, the holders of the Pre-Funded Warrants will be entitled to receive, upon exercise of the Pre-Funded Warrants, the kind and amount of securities, cash or other property that the holders would have received had they exercised the Pre-Funded Warrants immediately prior to such transaction. The Pre-Funded Warrants do not entitle
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the holders thereof to any voting rights or any of the other rights or privileges to which holders of common stock are entitled.
The securities issued have the benefit of the Registration Rights Agreement (the “Registration Rights Agreement”), dated as of February 27, 2024, by and among us and the 2024 Purchasers, requiring us to prepare and file a registration statement with the SEC as soon as reasonably practicable, but in no event later March 28, 2024 (“Filing Deadline”), and to use commercially reasonable efforts to have the registration statement declared effective within 30 days of the Filing Deadline, subject to extension under the terms of the Registration Rights Agreement. We satisfied our obligations under the Registration Rights Agreement by filing a registration statement on Form S-3 on May 12, 2023, which became effective on April 25, 2024. We are using the net proceeds to fund research and development and registration of its pipeline candidates, and for working capital and general corporate purposes. As of June 30, 2025, the Company had 2,000,000 Pre-Funded Warrants from the March 2024 private placement outstanding. Such Pre-Funded Warrants were subsequently exercised on July 30, 2025 and, following such exercise, no Pre-Funded Warrants from the March 2024 private placement remain outstanding.
Components of Our Results of Operations
Revenue
Since inception, we have not generated any product revenue and do not expect to generate any revenue from the sale of products for the foreseeable future until after we receive regulatory approval. To date, we have generated revenue solely from licensing of intellectual property and sale of research and development services. If our development efforts for our product candidates are successful and result in regulatory approval, or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from collaboration or license agreements. However, there can be no assurance as to when we will generate such revenue, if at all.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our product candidates, and include:
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We expense research and development costs as incurred. Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses.
Research and development costs also include costs incurred in connection with certain licensing arrangements. Before a compound receives regulatory approval, we record upfront and milestone payments made by us to third parties under licensing arrangements as an expense. Upfront payments are recorded when incurred, and milestone payments are recorded when the specific milestone has been achieved. Once a compound receives regulatory approval, we will record any milestone payments in identifiable intangible assets, commence amortization and, unless the asset is determined to have an indefinite life, we amortize the payments on a straight-line basis over the remaining agreement term or the expected product life cycle, whichever is shorter.
Research and development activities are central to our business model. We expect that our research and development expenses will remain a significant expense for the foreseeable future as we continue clinical development for our product candidates and continue to discover and develop additional product candidates. If any of our product candidates enter into later stages of clinical development, they will generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later‑stage clinical trials. Historically, we have incurred research and development expenses that primarily relate to the development of AT‑007, and AT-001 programs. As we advance our product candidates, we expect to allocate our direct external research and development costs across each of the indications or product candidates.
The following table summarizes our research and development expenses for the three and six months ended June 30, 2025 and 2024:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Product pipeline research and development expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
AT-001 |
|
$ |
166 |
|
|
$ |
554 |
|
|
$ |
553 |
|
|
$ |
4,025 |
|
AT-007 |
|
|
5,429 |
|
|
|
6,441 |
|
|
|
9,650 |
|
|
|
12,141 |
|
Personnel-related expenses |
|
|
3,113 |
|
|
|
1,745 |
|
|
|
5,408 |
|
|
|
3,592 |
|
Stock-based compensation |
|
|
1,011 |
|
|
|
964 |
|
|
|
1,598 |
|
|
|
1,956 |
|
Other expenses |
|
|
204 |
|
|
|
300 |
|
|
|
551 |
|
|
|
507 |
|
Total research and development expenses |
|
$ |
9,923 |
|
|
$ |
10,004 |
|
|
$ |
17,760 |
|
|
$ |
22,221 |
|
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, and commercial functions. General and administrative expenses also include professional fees for legal, accounting, auditing, tax and consulting services; travel expenses; and facility-related expenses, which include expenses for rent and maintenance of facilities and other operating costs.
Commercial expenses consist of payroll expense for commercial personnel, as well as marketing, market research, market access, and other focused investments to support launch of drug candidates and generate evidence of commercial potential and value proposition. Commercial expenses are included in general and administrative expenses.
We expect that our general and administrative expenses will remain a significant expense in the foreseeable future as we may increase our general and administrative headcount to support our continued research and development and potential commercialization of our product candidates. We also expect to incur increased expenses as we continue to operate as a public company, including costs of accounting, audit, legal, regulatory and tax compliance services, director and officer insurance costs; and investor and public relations costs.
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Other Income (Expense), Net
Other income (expense), net consists of interest income (expense), net, other income (expense), net and change in fair value of warrant liabilities. Interest income (expense), net consists primarily of our interest income on our cash and cash equivalents and marketable securities. Other income (expense), net consists primarily of foreign currency gains/losses. Changes in fair value of warrant liabilities consists of mark to market changes on our common warrants that are classified as liabilities.
Results of Operations
Three months ended June 30, 2025 and 2024
The following table summarizes our results of operations for the three months ended June 30, 2025 and 2024:
|
|
Three Months |
|
|||||
|
|
June 30, |
|
|||||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
REVENUE: |
|
|
|
|
|
|
||
Research and development services revenue |
|
$ |
— |
|
|
$ |
144 |
|
Total revenue |
|
|
— |
|
|
|
144 |
|
COSTS AND EXPENSES: |
|
|
|
|
|
|
||
Research and development |
|
|
9,923 |
|
|
|
10,004 |
|
General and administrative |
|
|
13,175 |
|
|
|
10,580 |
|
Total costs and expenses |
|
|
23,098 |
|
|
|
20,584 |
|
LOSS FROM OPERATIONS |
|
|
(23,098 |
) |
|
|
(20,440 |
) |
OTHER (EXPENSE) INCOME, NET: |
|
|
|
|
|
|
||
Interest income |
|
|
364 |
|
|
|
628 |
|
Change in fair value of warrant liabilities |
|
|
1,437 |
|
|
|
22,744 |
|
Other expense |
|
|
(33 |
) |
|
|
(34 |
) |
Total other income (expense), net |
|
|
1,768 |
|
|
|
23,338 |
|
Net loss (income) |
|
$ |
(21,330 |
) |
|
$ |
2,898 |
|
Revenue
Revenue for the three months ended June 30, 2025 was $0, compared to $0.1 million for the three months ended June 30, 2024. For the three months ended June 30, 2025, the decrease of $0.1 million was primarily related to:
Research and Development Expenses
The following table summarizes our research and development expenses for the three months ended June 30, 2025 and 2024:
|
|
Three Months Ended |
|
|
|
|
||||||
|
|
June 30, |
|
|
|
|
||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
Increase/(Decrease) |
|
|||
Clinical and pre-clinical |
|
$ |
4,181 |
|
|
$ |
5,898 |
|
|
$ |
(1,717 |
) |
Drug manufacturing and formulation |
|
|
563 |
|
|
|
403 |
|
|
|
160 |
|
Personnel expenses |
|
|
3,113 |
|
|
|
1,745 |
|
|
|
1,368 |
|
Stock-based compensation |
|
|
1,011 |
|
|
|
964 |
|
|
|
47 |
|
Regulatory and other expenses |
|
|
1,055 |
|
|
|
994 |
|
|
|
61 |
|
Total research and development expenses |
|
$ |
9,923 |
|
|
$ |
10,004 |
|
|
$ |
(81 |
) |
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Research and development expenses for the three months ended June 30, 2025 were $9.9 million, compared to $10.0 million for the three months ended June 30, 2024. For the three months ended June 30, 2025, the decrease of $0.1 million was primarily related to:
General and Administrative Expenses
The following table summarizes our general and administrative expenses for the three months ended June 30, 2025 and 2024:
|
|
Three Months Ended |
|
|
|
|
||||||
|
|
June 30, |
|
|
|
|
||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
Increase/(Decrease) |
|
|||
Legal and professional fees |
|
$ |
7,660 |
|
|
$ |
2,855 |
|
|
$ |
4,805 |
|
Commercial expenses |
|
|
637 |
|
|
|
3,730 |
|
|
|
(3,093 |
) |
Personnel expenses |
|
|
2,486 |
|
|
|
1,992 |
|
|
|
494 |
|
Stock-based compensation |
|
|
1,089 |
|
|
|
926 |
|
|
|
163 |
|
Insurance expenses |
|
|
278 |
|
|
|
421 |
|
|
|
(143 |
) |
Other expenses |
|
|
1,025 |
|
|
|
656 |
|
|
|
369 |
|
Total general and administrative expenses |
|
$ |
13,175 |
|
|
$ |
10,580 |
|
|
$ |
2,595 |
|
General and administrative expenses were $13.2 million for the three months ended June 30, 2025, compared to $10.6 million for the three months ended June 30, 2024. For the three months ended June 30, 2025, the increase of $2.6 million was primarily related to:
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Interest Income, Net
Interest income was $0.4 million for the three months ended June 30, 2025 and $0.6 million for the three months ended June 30, 2024. The decrease of $0.2 million was primarily attributable to an overall decrease in cash balance.
Change in Fair Value of Warrant Liabilities
Change in the fair value of warrant liabilities was $1.4 million income for the three months ended June 30, 2025, as compared to $22.7 million income for the three months ended June 30, 2024. The change in the fair value of warrant liabilities was primarily related to an overall decrease in the Company’s share price.
Other Expense
Other expense was $33,000 for the three months ended June 30, 2025, compared to $34,000 for the three months ended June 30, 2024, primarily due to foreign exchange losses.
Six months ended June 30, 2025 and 2024
The following table summarizes our results of operations for the six months ended June 30, 2025 and 2024:
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|||||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
REVENUE: |
|
|
|
|
|
|
||
Research and development services revenue |
|
|
— |
|
|
|
334 |
|
Total revenue |
|
|
— |
|
|
|
334 |
|
COSTS AND EXPENSES: |
|
|
|
|
|
|
||
Research and development services revenue |
|
|
17,760 |
|
|
|
22,221 |
|
General and administrative |
|
|
30,863 |
|
|
|
19,646 |
|
Total costs and expenses |
|
|
48,623 |
|
|
|
41,867 |
|
LOSS FROM OPERATIONS |
|
|
(48,623 |
) |
|
|
(41,533 |
) |
OTHER (EXPENSE) INCOME, NET: |
|
|
|
|
|
|
||
Interest income |
|
|
985 |
|
|
|
1,215 |
|
Change in fair value of warrant liabilities |
|
|
4,541 |
|
|
|
(40,660 |
) |
Other expense |
|
|
(58 |
) |
|
|
(62 |
) |
Total other (expense) income, net |
|
|
5,468 |
|
|
|
(39,507 |
) |
Net loss |
|
$ |
(43,155 |
) |
|
$ |
(81,040 |
) |
Revenue
Revenue for the six months ended June 30, 2025 was $0, compared to $0.3 million for the six months ended June 30, 2024. For the six months ended June 30, 2025, the decrease of $0.3 million was primarily related to:
33
Table of Contents
Research and Development Expenses
The following table summarizes our research and development expenses for the six months ended June 30, 2025 and 2024:
|
|
Six Months Ended |
|
|
|
|
||||||
|
|
June 30, |
|
|
|
|
||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
Increase/(Decrease) |
|
|||
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 |
|
Stock-based compensation |
|
|
1,598 |
|
|
|
1,956 |
|
|
|
(358 |
) |
Regulatory and other expenses |
|
|
1,768 |
|
|
|
1,984 |
|
|
|
(216 |
) |
Total research and development expenses |
|
$ |
17,760 |
|
|
$ |
22,221 |
|
|
$ |
(4,461 |
) |
Research and development expenses for the six months ended June 30, 2025 were $17.8 million, compared to $22.2 million for the six months ended June 30, 2024. For the six months ended June 30, 2025, the decrease of $4.5 million was primarily related to:
General and Administrative Expenses
The following table summarizes our general and administrative expenses for the six months ended June 30, 2025 and 2024:
|
|
Six Months Ended |
|
|
|
|
||||||
|
|
June 30, |
|
|
|
|
||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
Increase/(Decrease) |
|
|||
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 |
|
Stock-based compensation |
|
|
1,990 |
|
|
|
2,313 |
|
|
|
(323 |
) |
Insurance expenses |
|
|
606 |
|
|
|
848 |
|
|
|
(242 |
) |
Other expenses |
|
|
1,975 |
|
|
|
2,295 |
|
|
|
(320 |
) |
Total general and administrative expenses |
|
$ |
30,863 |
|
|
$ |
19,646 |
|
|
$ |
11,217 |
|
34
Table of Contents
General and administrative expenses were $30.9 million for the six months ended June 30, 2025, compared to $19.6 million for the six months ended June 30, 2024. For the six months ended June 30, 2025, the increase of $11.2 million was primarily related to:
Interest Income, Net
Interest income was $1.0 million for the six months ended June 30, 2025 and $1.2 million for the six months ended June 30, 2024. The decrease of $0.2 million was primarily attributable to an overall decrease in cash balance.
Change in Fair Value of Warrant Liabilities
Change in the fair value of warrant liabilities was $4.5 million income for the six months ended June 30, 2025 , as compared to $40.7 million loss for the six months ended June 30, 2024. The change in the fair value of warrant liabilities was primarily related to an overall decrease in the Company’s share price.
Other Expense
Other expense was $0.1 million for each of the six months ended June 30, 2025 and 2024, primarily due to foreign exchange losses.
Liquidity and Capital Resources
Since our inception and through June 30, 2025, we have not generated any product revenue and have incurred significant operating losses and negative cash flows from our operations. The accompanying unaudited condensed financial statements have been prepared assuming the continuation of the Company as a going concern. We may provide for capital requirements through financing and other transactions, and selling shares under the Leerink ATM Agreement. However, there can be no assurance that we will be able to raise additional capital to fund our operations with terms acceptable to us, or at all. Broadly, we have not yet established an ongoing source of product revenue sufficient to cover our operating costs and we are dependent on debt and equity financing to fund our operations. As of June 30, 2025 , our cash and cash equivalents were $30.4 million. We will need to obtain substantial additional funding in connection with our continuing operations and planned research and clinical development activities. Additionally, we may encounter unforeseen expenses, including in connection with reevaluating our product candidates and potential new trials. Given our planned expenditures for the next several years, we have concluded that there is still a substantial doubt regarding our ability to continue as a going concern for a period of 12 months beyond the filing of this Quarterly Report Form
35
Table of Contents
10-Q. Our ability to continue as a going concern is dependent upon our uncertain ability to obtain additional capital, reduce expenditures and/or execute on our business plan. The accompanying unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Cash Flows
The following table summarizes our cash flows for each of the periods presented:
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|||||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Net cash used in operating activities |
|
$ |
(48,977 |
) |
|
$ |
(41,506 |
) |
Net cash provided by investing activities |
|
|
— |
|
|
|
— |
|
Net cash provided by financing activities |
|
|
— |
|
|
|
113,805 |
|
Net (decrease) increase in cash and cash equivalents |
|
$ |
(48,977 |
) |
|
$ |
72,299 |
|
Operating Activities
Net cash used in operating activities for the six months ended June 30, 2025, was $49.0 million primarily due to our net loss of $43.2 million, a decrease in accrued expenses and other current liabilities of $5.5 million, a decrease in operating lease liabilities of $0.2 million, a decrease in warrant liabilities of $4.5 million, a decrease in prepaid expenses of $0.2 million. This is partially offset by an increase of $3.6 million in non-cash stock-based compensation expense, an increase in accounts payable of $0.4 million, and amortization of operating lease right-of-use assets of $0.2 million.
Net cash used in operating activities for the six months ended June 30, 2024, was $41.5 million primarily due to our net losses of $81.0 million, a decrease in accrued expenses and other current liabilities of $4.7 million, a decrease in other liabilities of $0.8 million, a decrease in prepaid expenses of $1.5 million, and a decrease in operating lease liability of $0.3 million. This is partially offset by an increase in fair value of warrant liabilities of $40.7 million, an increase of $4.3 million in non-cash stock-based compensation expense, amortization of insurance premium of $0.6 million, increase in accounts payable of $0.9 million, amortization of operating lease right-of-use assets of $0.2 million and amortization of leasehold improvements of $1,000.
Investing Activities
There was no net cash provided by investing activities for the six months ended June 30, 2025 and 2024, due to no investing activities.
Financing Activities
Net cash provided by financing activities for the six months ended June 30, 2025, was zero due to the Company obtaining no financing for the six months ended June 30, 2025.
During the six months ended June 30, 2024, net cash provided by financing activities was $113.8 million, primarily from proceeds from the issuance of shares and pre-funded warrants of $104.7 million as part of the March 2024 private placement and issuance of shares under the Leerink ATM Agreement, and $9.0 million from the exercise of common warrants, $0.3 million from exercise of stock options for common stock under the equity incentive plan, partially offset by repayment of short-term borrowings of $0.3 million.
Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our product candidates. We believe that our expenses may increase significantly if and as we:
36
Table of Contents
Due to the numerous risks and uncertainties associated with the development of our product candidates and programs, and because the extent to which we may enter into collaborations with third parties for development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future funding requirements, both near and long‑term, will depend on many factors, including:
37
Table of Contents
A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate.
Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of public and private offerings of securities, debt financings, collaborations or licensing arrangements with third parties or other strategic transactions. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. However, the trading prices for our common stock and for other biopharmaceutical companies have been highly volatile. As a result, we may face difficulties raising capital through sales of our common stock, and such sales may be on unfavorable terms. Similarly, adverse macroeconomic conditions and market volatility resulting from macroeconomic developments, geopolitical developments, high inflation, rising interest rates, international tariffs, changes in international trade relationships and military conflicts or other factors could materially and adversely affect our ability to consummate an equity or debt financing on favorable terms or at all. To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, current ownership interests will be diluted. If we raise additional funds through collaborations or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. In addition, debt financing, if available, may result in fixed payment obligations and may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, creating liens, redeeming stock or declaring dividends, that could adversely impact our ability to conduct our business. If we are unable to obtain funding when needed, we may be required to delay, limit, reduce or terminate some or all of our research and product development, product portfolio expansion or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations and Commitments
We lease certain assets under noncancelable operating leases, which expire through 2029. The leases relate primarily to office space. As of June 30, 2025, aggregate future minimum commitments under these office leases are $3.5 million through 2029, excluding any related common area maintenance charges and real estate taxes.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or
38
Table of Contents
("U.S. GAAP"). The preparation of our financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
There have been no significant changes to our critical accounting policies from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the Annual Report.
Off‑Balance Sheet Arrangements
We have not entered into any off‑balance sheet arrangements and do not have any holdings in variable interest entities.
Recently Issued Accounting Pronouncements
Any recent accounting pronouncements issued by the FASB or other authoritative standards groups with future effective dates are either not applicable or are not expected to be significant to the financial statements of the Company.
Smaller Reporting Company Status
We are a “smaller reporting company” as defined in the Exchange Act. We may take advantage of certain of the scaled disclosures available to smaller reporting companies until for so long as either (i) our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities and foreign currency sensitivities.
Interest Rate Sensitivity
Our exposure to market risk relates to our cash, and cash equivalents of $30.4 million as of June 30, 2025. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. Some of the financial instruments in which we invest could be subject to market risk where the interest rates may cause the value of the instruments to fluctuate. To minimize this risk, we intend to maintain a portfolio which may include cash, cash equivalents and short-term investment securities available-for-sale in a variety of securities.
We do not believe that our cash has significant risk of default or illiquidity. While we believe our cash and cash equivalents does not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. In addition, we maintain significant amounts of cash at one or more financial institutions that are in excess of federally insured limits. Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation has had a material effect on our results of operations during the periods presented.
39
Table of Contents
Foreign Currency Sensitivity
Our primary operations are transacted in U.S. Dollars, however, certain service agreements with third parties are denominated in currencies other than the U.S. Dollar, primarily the Euro. As such, we are subject to foreign exchange risk and therefore, fluctuations in the value of the U.S. Dollar against the Euro may impact the amounts reported for expenses and obligations incurred under such agreements. We do not participate in any foreign currency hedging activities and we do not have any other derivative financial instruments. We did not recognize any significant exchange rate gain or loss during the three and six months ended June 30, 2025. A hypothetical 10% change in foreign exchange rates during any of the periods presented would not have a material impact on our financial condition or results of operations.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures.
As of June 30, 2025, our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on that evaluation, our Principal Executive Officer and Principal Financial Officer has concluded that, as of June 30, 2025, our disclosure controls and procedures were effective at a reasonable assurance level.
Previously Reported Material Weakness in Internal Control over Financial Reporting
As described in our Annual Report on Form 10-K, in connection with our assessment of our internal control over financial reporting for fiscal year ended December 31, 2024, we identified a material weakness related to deficiencies in the principles associated with the information and communication component of the COSO framework. Factors contributing to the material weakness included a failure to appropriately design and operate internal controls to ensure complete and timely communication between our former chief executive officer, senior management and our board of directors. The Company did not have an effective communication process to ensure that relevant and reliable information was communicated timely across the organization to enable management to effectively carry out their financial reporting and internal control roles and responsibilities.
Remediation Status of Previously Reported Material Weakness
Management has enhanced its resources as described below and implemented several enhanced internal controls that are designed to remediate the material weakness. Our former chief executive officer and chairman of our board of directors resigned from the Company on December 19, 2024. On December 19, 2024, our board of directors appointed a new executive chairman of our board of directors and an interim chief executive officer, with extensive public company experience to improve communication with the board of directors and senior management and compliance with policies within our organization. Management has also instituted additional disclosure controls, including a rigorous disclosure review process that includes the executive team and legal counsel. As part of enhancing resources, the board has instituted a cross-functional quality council comprised of senior leadership of our company and external parties, which provides independent oversight over good practice, quality guidelines and regulations and reports its findings to senior leadership and our board of directors. Management believes its enhanced resources and control activities, including the cross-functional quality council, will support the functioning of the information and
40
Table of Contents
communication principles. In addition, we have hired a chief regulatory officer and a head of quality both reporting to the executive chairman.
Management has implemented the above enhanced internal controls in the first quarter of 2025 as part of its plan to remediate the material weakness. Management has determined that these controls operated effectively in the first two quarters of 2025 and concluded that material weakness was fully remediated as of June 30, 2025.
We cannot assure you that material weaknesses or significant deficiencies will not occur in the future or that we will be able to remediate such weaknesses or deficiencies in a timely manner, which could impair our ability to accurately and timely report our financial position, result of operations or cash flows. For additional information see the related risks in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.
Changes in Internal Control over Financial Reporting
We have taken the appropriate actions to remediate material weakness relating to internal control over financial reporting as described above. Except as discussed above, there were no changes in our internal control over financial reporting (as such term is defined by Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
41
Table of Contents
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
Securities Class Action Litigation
On December 17, 2024, a purported stockholder filed a putative class action lawsuit against the Company and certain current and former Company officers and directors in the United States District Court for the Southern District of New York (Alexandru v. Applied Therapeutics, Inc., et al., No. 1:24-cv-09715). The complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder by making false and/or misleading statements between January 3, 2024 to December 2, 2024 in connection with the Company’s NDA to the FDA for govorestat for the treatment of Classic Galactosemia, and seeks unspecified damages. On December 27, 2024, another purported stockholder filed a putative class action lawsuit against the Company and a former Company officer and director in the United States District Court for the Southern District of New York (Ikram v. Applied Therapeutics, Inc., et al., No. 1:24-cv-09973). The complaint alleges claims substantially similar to those alleged in the Alexandru action and also seeks unspecified damages. On February 18, 2025, several purported stockholders filed motions seeking to consolidate the Alexandru and Ikram actions and seeking appointment as lead plaintiff in the consolidated action. On March 11, 2025, the court consolidated the Alexandru and Ikram actions (In re Applied Therapeutics Securities Litigation, No. 1:24-cv-9715) and appointed a lead plaintiff and lead counsel. On May 2, 2025, lead plaintiff filed a consolidated amended complaint. On May 23, 2025, the Company filed an answer to the consolidated amended complaint and the individual defendants filed motions to dismiss. On June 13, 2025, lead plaintiff filed a second amended complaint and the Court issued a scheduling order setting deadlines for pretrial proceedings, including discovery. On June 27, 2025, the Company filed an answer to the second amended complaint and the individual defendants filed motions to dismiss. Briefing on the motions to dismiss concluded on July 18, 2025, and the motions remain pending.
Shareholder Derivative Litigation
On January 31, 2025, a purported stockholder filed a derivative action in the United States District Court for the Southern District of New York (Hassine v. Shendelman, et al., No. 1:25-cv-00935). The complaint purports to assert derivative claims against certain current and former Company officers and directors for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, violations of Section 14(a) of the Exchange Act, and contribution under Sections 10(b) and 21D of the Exchange Act. The complaint seeks to implement reforms to the Company’s corporate governance and internal procedures and to recover on behalf of the Company for any liability the Company might incur as a result of the individual defendants’ alleged misconduct, as well as declaratory, equitable, and monetary relief, including attorneys’ fees and other costs. The derivative action is based substantially on the same facts alleged in the consolidated action described above. On March 4, 2025, plaintiff and the Company filed a joint stipulation seeking to temporarily stay the derivative action. On March 5, 2025, the court so-ordered the stipulation, thereby temporarily staying the derivative action.
Item 1A. Risk Factors.
An investment in shares of our common stock involves a high degree of risk. You should carefully consider the following information about these risks described below, together with other information appearing elsewhere in this Quarterly Report on Form 10-Q, including our unaudited condensed financial statements and the related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline and you may lose all or part of your investment.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations and the market price of our common stock.
Risk Factor Summary
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The following is a summary of the risk factors included in this Item 1A and is qualified entirely by the disclosure included in the rest of this Item 1A:
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Risks Related to Our Financial Position and Capital Needs
We have incurred significant operating losses since inception and anticipate that we will continue to incur substantial operating losses for the foreseeable future and may never achieve or maintain profitability.
Since inception in January 2016, we have incurred significant operating losses. Our net loss was $105.6 million and $119.8 million for the years ended December 31, 2024, and 2023, respectively and $43.2 million and $81.0 million for the six months ended June 30, 2025, and 2024, respectively. As of June 30, 2025, we had an accumulated deficit of $617.4 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. Since inception, we have devoted substantially all of our efforts to research and preclinical and clinical development of our product candidates, organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and conducting clinical trials. To date, we have never obtained regulatory approval for, or commercialized, any drugs. It could be several years, if ever, before we have a commercialized drug. The net losses we incur may fluctuate significantly from quarter to quarter and year-to-year. We anticipate that our expenses will increase substantially if, and as, we:
Furthermore, we have recently incurred and likely will continue to incur additional costs associated with the Complete Response Letter we received from the FDA in November 2024 for the NDA we submitted for govorestat for the treatment of Classic Galactosemia, the Warning Letter related to the Phase 2/3, ACTION-Galactosemia Kids study, the departure of our founder and CEO and securities-related class action litigation and derivative litigation, including significant legal, accounting, investor relations and other expenses.
To become and remain profitable, we must succeed in developing and eventually commercializing drugs that generate significant revenue. This will require us to be successful in a range of challenging activities, including completing preclinical studies and clinical trials of our current and future product candidates, obtaining regulatory approval, procuring commercial‑scale manufacturing, marketing and selling any products for which we obtain regulatory approval (including through third parties), as well as discovering or acquiring and developing additional product
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candidates. We are only in the preliminary stages of most of these activities. We may never succeed in these activities and, even if we do, may never generate revenues that are sufficient to offset our expenses and achieve profitability.
Because of the numerous risks and uncertainties associated with drug development, we are unable to accurately predict the timing or amount of expenses or when, or if, we will be able to achieve profitability. If we are required by regulatory authorities to perform studies in addition to those currently expected, or if there are any additional delays in the initiation and completion of our clinical trials or the development and approval of any of our product candidates, our expenses will likely increase.
Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. Any additional decline in the value of our common stock could also cause you to lose all or part of your investment.
The report of our independent registered public accounting firm included a “going concern” explanatory paragraph.
The report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2024 includes an explanatory paragraph regarding the existence of substantial doubt about our ability to continue as a going concern. Our cash and cash equivalents were $30.4 million at June 30, 2025. We will need to obtain substantial additional funding in connection with our continuing operations and planned research and clinical development activities. Additionally, we may encounter unforeseen expenses, including in connection with reevaluating our product candidates and potential new trials. Given our planned expenditures for the next several years, we have concluded, and our independent registered public accounting firm has agreed with our conclusion that there is still a substantial doubt regarding our ability to continue as a going concern for a period of 12 months beyond the filing of this Quarterly Report on Form 10-Q. Any such inability to continue as a going concern may result in our stockholders losing their entire investment. There is no guarantee that we will become profitable or secure additional financing on acceptable terms.
We have previously identified material weaknesses in our internal control over financial reporting. We may identify additional material weaknesses or other deficiencies in the future, and this could continue to materially impair our ability to report accurate financial information in a timely manner.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Our management, with the participation of our principal executive officer and principal financial officer, evaluate the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) at the end of each fiscal year. Maintaining effective disclosure controls and procedures and effective internal controls over financial reporting are necessary for us to produce reliable financial statements and disclosure reports.
We have previously identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that a reasonable possibility exists that a material misstatement of the annual or interim financial statements would not be prevented or detected on a timely basis. For example, in connection with the audit of our financial statements for the year ended December 31, 2023, we identified a material weakness in our internal control over financial reporting related to deficiencies in our controls over the financial statement close process, which was fully remediated as of March 31, 2024. In addition, as further described in Part I, Item 4 above and in Part II, Item 9A, in the Annual Report, in connection with the audit of our financial statements for the year ended December 31, 2024, we identified a material weakness related to deficiencies in the principles associated with the information and communication component of the COSO framework. During the first half of 2025, our management developed and implemented a remediation plan to address such material weakness. Based on the implementation of this remediation plan, we have concluded that the material weakness has been remediated as of June 30, 2025.
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We expect to continue our efforts to improve our control processes, though there can be no assurance that our efforts will be successful or avoid potential future material weaknesses, and we expect to incur additional costs as a result of these efforts. While we recently remediated the aforementioned material weakness, if, in the future, we are unable to successfully remediate future material weaknesses, the material weaknesses could result in material misstatements to our annual or interim consolidated financial statements that might not be prevented or detected on a timely basis, or in delayed filings of our required periodic reports. This might lead to investors losing confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be adversely affected, and we could become subject to litigation or investigations by Nasdaq, the SEC or other regulatory authorities, which could require additional financial and management resources.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner or prevent fraud, which would adversely affect investor confidence in our company and harm our business.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations in a timely manner, or at all. Testing by us conducted in connection with Section 404(a) of the Sarbanes Oxley Act may reveal material weaknesses in our internal controls over financial reporting related to our limited finance, accounting and IT staffing levels. For example, in connection with the audit of our financial statements for the year ended December 31, 2023, we identified a material weakness in our internal control over financial reporting related to deficiencies in our controls over the financial statement close process, which was fully remediated as of March 31, 2024. In addition, as further described in Part I, Item 4 above and in Part II, Item 9A, in the Annual Report, in connection with the audit of our financial statements for the year ended December 31, 2024, we identified a material weakness related to deficiencies in the principles associated with the information and communication component of the COSO framework, which was fully remediated as of June 30, 2025. Subsequent testing by our independent registered public accounting firm in connection with Section 404(b) of the Sarbanes Oxley Act may reveal continued or additional deficiencies in our internal controls over financial reporting that are deemed to be significant deficiencies or material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.
We are required to disclose material changes made in our internal controls over financing reporting and procedures on a quarterly basis and our management are required to assess the effectiveness of these controls annually. We are also required to make a formal assessment of the effectiveness of our internal control over financial reporting, and once we cease to be a non-accelerated filer, we will be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. However, for as long as we are a smaller reporting company under the JOBS Act or a non-accelerated filer, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act.
To achieve compliance with Section 404(a) of the Sarbanes-Oxley Act, we engage in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to implement our remediation plan, continue to dedicate internal resources, potentially engage additional outside consultants to assess the adequacy of our internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are designed and operating effectively and implement a continuous reporting and improvement process for internal control over financial reporting.
We determined that, as of June 30, 2025, our disclosure controls and procedures were effective at a reasonable assurance level. The effectiveness of our internal controls in future periods is subject to the risk that our controls may become inadequate because of changes in conditions. We may discover material weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial statements. Our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s
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objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.
If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls over financial reporting, we may not be able to produce timely and accurate financial statements. If that were to happen, our investors could lose confidence in our reported financial information, the market price of our stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities including equivalent foreign authorities.
Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
We are a clinical‑stage company with limited operational history, and our operations to date have been largely focused on raising capital, organizing and staffing our company, identifying and developing our product candidates, and undertaking preclinical and clinical development for our product candidates. As an organization, we have not yet demonstrated an ability to successfully complete clinical development, obtain regulatory approvals, manufacture a commercial‑scale product or conduct sales and marketing activities necessary for successful commercialization, or arrange for a third party to conduct these activities on our behalf. Consequently, any predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history.
In connection with our efforts to address the issues referenced in the Warning Letter, including reevaluating govorestat for the treatment of Classic Galactosemia and CMT-SORD, we expect to encounter significant additional expenses, including expenses that we had not expected, as well as additional unforeseen expenses, difficulties, complications, delays, and other known or unknown factors in achieving our business objectives. If we are successful in our clinical trials for a product candidate, we will need to transition at some point from a company with a research and development focus to a company capable of supporting commercial activities. We may not be successful in such a transition.
Additionally, we expect our financial condition to continue to fluctuate from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance.
We will require substantial additional funding to finance our operations. If we are unable to raise capital when needed, we could be forced to delay, reduce or terminate certain of our development programs or other operations.
As of June 30, 2025, we had $30.4 million in cash and cash equivalents. We will need to obtain substantial additional funding in connection with our continuing operations and planned research and clinical development activities. Additionally, we may encounter unforeseen expenses, including in connection with reevaluating our product candidates and potential new trials. There is no assurance that we will be able to obtain such additional financing on favorable terms or at all, or to fund our operations beyond that point. Our future capital requirements will depend on many factors, including:
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Identifying potential product candidates and conducting preclinical testing and clinical trials is a time‑consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of drugs that we do not expect to be commercially available for several years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. We may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.
In addition, our ability to access additional capital has and will be affected by the decrease in our common stock trading price and the Complete Response Letter for the govorestat NDA for Classic Galactosemia and the Warning Letter we received from the FDA which may have damaged our reputation, which have caused the price of our common stock to fluctuate significantly and/or decline significantly. Also, adverse macroeconomic conditions or market volatility resulting from national or global economic developments, political unrest, high inflation, elevated interest rates, international tariffs, changes in international trade relationships and military conflicts, such as the ongoing conflict between Russia and Ukraine, potential for significant changes in U.S. policies or regulatory environment or other factors, could materially and adversely affect our business operations. Sanctions imposed by the U.S. and other countries in response to such conflicts may also continue to adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability. For example, the U.S. has recently imposed blanket 10% tariffs on virtually all imports to the U.S. and significantly higher tariffs applicable to imports from many countries, which have resulted in other countries imposing additional tariffs on imports from the U.S., and is likely to continue to result in more retaliatory tariffs. On April 9, 2025, the U.S. announced a temporary pause on its tariffs applicable to many countries, while increasing the tariffs applicable to imports from China. The Trump administration has threatened to continue to broadly impose tariffs, which could lead to corresponding punitive actions by the countries with which the U.S. trades. There can be no assurance that deterioration in credit and financial markets and confidence in economic conditions will not occur. For instance, actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. Investor concerns regarding the U.S. or international financial systems
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could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. In addition, any deterioration in the macro-economy or financial services industry could lead to losses or defaults by our suppliers, which in turn, could have a material adverse effect on our current and/or planned business operations and our current or projected results of operations and financial condition. Also, current inflationary trends in the global economy may impact salaries and wages, costs of goods and transportation expenses, among other things, and recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures may create market and economic instability.
Further, U.S. government appropriations have been affected by larger U.S. government budgetary issues and related legislation. Government spending levels are difficult to predict beyond the near term due to numerous factors, including the external threat environment, future government priorities and the state of government finances. Significant changes in government spending or changes in U.S. government priorities, policies and requirements could have a material adverse effect on our results of operations, financial condition or liquidity. As a result, adequate additional financing may not be available to us when needed or on attractive terms. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce, or altogether terminate our research and development programs or future commercialization efforts. In addition, a portion of our supply chain is located in countries that may be subject to new or increased tariffs, which could lead to increased costs to us.
Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.
Raising additional capital may cause dilution to our stockholders and restrict our operations or require us to relinquish rights to our product candidates.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through public or private equity or debt financings, including through third party funding, marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest in our company may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt and equity financings, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as redeeming our shares, making investments, incurring additional debt, making capital expenditures, declaring dividends or placing limitations on our ability to acquire, sell or license intellectual property rights.
We also could be required to seek funds through arrangements with collaborators or otherwise at an earlier stage than otherwise would be desirable. If we raise additional capital through future collaborations, strategic alliances or third party licensing arrangements, we may have to relinquish valuable rights to our intellectual property, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional capital when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise develop and market ourselves.
Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.
We have incurred substantial losses since inception and do not expect to become profitable in the near future, if ever. In general, under Section 382 of the United States Internal Revenue Code of 1986, as amended (the "Code"), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses (“NOLs”) to offset future taxable income. An ownership change for these purposes is generally defined as a greater than 50% change, by value, in the equity ownership of a corporation over a 3-year period. We may have experienced ownership changes in the past and may experience ownership changes in the future as a result of subsequent changes in our stock ownership (some of which shifts are outside our control). As a result, if, and to the extent that we
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earn net taxable income, our ability to use our pre-change NOLs to offset such taxable income may be subject to limitations.
For NOLs arising in tax years beginning after December 31, 2017, the Code limits a taxpayer’s ability to utilize NOL carryforwards to 80% of taxable income. In addition, NOLs arising in tax years ending after December 31, 2017, can be carried forward indefinitely, but carryback is generally prohibited. NOLs generated in tax years beginning before January 1, 2018, are not subject to the 80% taxable income limitation, and NOLs generated in tax years ending before January 1, 2018, continue to have a two-year carryback and 20-year carryforward period. Deferred tax assets for NOLs are measured at the applicable tax rate in effect when the NOL is expected to be utilized. The limitations in the carryforward and carryback periods, as well as the limitation on use of NOLs arising in tax years beginning after December 31, 2017, may significantly impact our ability to utilize our NOLs to offset taxable income in the future.
In order to realize the future tax benefits of our NOL carryforwards, we must generate taxable income, of which there is no assurance. Accordingly, we have provided a full valuation allowance for deferred tax assets as of June 30, 2025 and December 31, 2024.
Risks Related to the Development and Commercialization of Our Product Candidates
We received a Warning Letter from the FDA for our NDA filed in December 2023 for our AT-007-1002 study. Failure to resolve the matters addressed in the Warning Letter could negatively impact our company’s ability to undertake clinical trials in the future or timely complete future NDA submissions.
In November 2024, we received a Warning Letter from the FDA relating to our AT-007-1002 study. The letter identified issues related to electronic data capture and also referred to a dosing error in the dose-escalation phase of our study resulting in slightly lower levels than targeted in a limited number of patients. We responded to the Warning Letter in a timely manner and our response contained various remediation measures. We are closely working with our clinical team, consultants, and employees to develop and implement a plan that addresses FDA’s concerns. Such actions have and will continue to increase our expenses, and the extent of those costs is still unknown.
If we are unable to sufficiently establish to the FDA that current or future clinical trials conducted by us would be in accordance with FDA regulations, we may be subject to enforcement action by the FDA including being subject to the FDA’s Application Integrity Policy. This policy would require third-party validation of the integrity of the raw data underlying any of our future filings to the FDA before those filings would be accepted for consideration. Such a requirement would be onerous and require significant additional time and expense, including unforeseen costs, for the clinical development and potential approval of any product candidates that we are currently developing and may wish to develop in the future. These requirements would make it difficult for us to attempt to restart the development of any of our former product candidates or commence the development of any new product candidates. Further, we could be subject to additional actions from the FDA that may negatively impact our ability to enter into clinical trials or submit an NDA in the future.
We recently received a Complete Response Letter from the FDA for our NDA for govorestat (AT-007) for the treatment of Classic Galactosemia, one of our lead product candidates, and we are currently evaluating our development program for Classic Galactosemia and SORD Deficiency, and do not currently know if govorestat will ever receive regulatory approval for any indication, which is necessary before it can be commercialized.
If we do not receive regulatory approval for govorestat (AT-007) for the treatment of Classic Galactosemia or SORD Deficiency or any other indication and we are not able to commercialize govorestat, we may not generate revenue for several years, if at all, and we may never generate sufficient revenue to achieve and sustain profitability. We need approval from the FDA prior to marketing our product candidates in the U.S. In December 2023, we submitted our first NDA to the FDA seeking approval for govorestat. In February 2024, the FDA accepted the filing of the NDA and the NDA was granted Priority Review status. In November 2024, the FDA issued a Complete Response Letter for the NDA. The Complete Response Letter indicates that the FDA completed its review of the application and determined that is unable to approve the NDA in its current form, citing deficiencies in the clinical application and failure to reach statistical significance on primary endpoints. Following receipt of the Complete Response Letter, we also withdrew the
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MAA to the EMA for govorestat for the treatment of Classic Galactosemia, as we believed more time was needed to acquire further data to support a European MAA. We are in the planning stages of determining our next steps with respect to our govorestat development program. Further clinical development of govorestat for any indications may require us to complete additional and more extensive clinical trials, which will be costly and time consuming. The amount and timing of the increased costs related to our clinical trials is difficult to predict due to the uncertainty inherent in the timing of clinical trial initiations, the rate of patient enrollment and the detailed design of future trials. If we continue our clinical development program for govorestat, we may not obtain necessary approvals from the FDA even if our trials demonstrate favorable results. The data we collect from any additional clinical trials may not demonstrate sufficient safety and efficacy to support regulatory approval of govorestat in which case we would experience potentially significant delays in, or be required to abandon, development of that product candidate. If we continue our clinical development program for govorestat, we will have fewer resources to devote to the research and development of our other product candidates and development stage programs. If we decide to terminate any further development of govorestat, we will be dependent upon the success of our other product candidates in our pipeline or other compounds we may in-license and the size of the potential markets for such other product candidates may not be as significant as the potential markets for govorestat, and we may not be able to monetize it.
Our other indications and development stage programs are in various stages of development. In light of recent regulatory developments, we will be closely examining the ongoing SORD Deficiency clinical development program and will continue to work with the FDA on the data needed to support an appropriate regulatory pathway for the drug, including ongoing work to provide the FDA with support for the potential use of the accelerated approval pathway for govorestat for the treatment of SORD Deficiency. We plan to meet with the FDA to discuss whether an NDA can be submitted based on the current data package and/or potential additional supporting data. However, there is no guarantee that the FDA will agree with this strategy, and the agency may require additional costly preclinical or clinical trials to support an NDA. There is also the risk that these additional trials will not be successful.
Our future success is substantially dependent on the successful clinical development, regulatory approval and commercialization of our product candidates. If we are not able to obtain required regulatory approvals, we will not be able to commercialize our product candidates and our ability to generate product revenue will be adversely affected.
We have invested a significant portion of our time and financial resources in the development of AT-007, AT-001 and AT-003. Our business is dependent on our ability to successfully complete development of, obtain regulatory approval for, and, if approved, successfully commercialize our product candidates in a timely manner. We may face unforeseen challenges in our drug development strategy, such as the Complete Response Letter received from the FDA for the NDA we submitted for govorestat, and we can provide no assurances that our drug design will prove to be effective, that we will be able to take advantage of expedited regulatory pathways for any of our product candidates, or that we will ultimately be successful in our future clinical trials.
We have not obtained regulatory approval for any product candidate, our NDA seeking approval of AT-007 for Classic Galactosemia received a Complete Response Letter and was not approved, and it is possible that any product candidates we may seek to develop in the future will not obtain regulatory approval. Neither we nor any future collaborator is permitted to market any product candidates in the United States or abroad until we receive regulatory approval from the FDA or applicable foreign regulatory agency. The time required to obtain approval or other marketing authorizations by the FDA and comparable foreign regulatory authorities is unpredictable and typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions.
Prior to obtaining approval to commercialize any product candidate in the United States or abroad, we must demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that such product candidate is safe and effective for its intended uses. The FDA requires “substantial evidence” to make a finding of effectiveness for any approval, including accelerated approval. Substantial evidence generally requires two adequate and well-controlled studies; however, in certain circumstances, substantial evidence may be based on a single, large, multicenter, adequate and well-controlled study together with confirmatory evidence to be sufficient.
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Results from preclinical studies and clinical trials can be interpreted in different ways. Even if we believe that the preclinical or clinical data for our product candidates are promising and meet the applicable approval standards, the FDA and other regulatory authorities may disagree, or it may no longer be acceptable to the FDA upon submission due to changes in regulatory standards. The FDA may also require us to conduct additional preclinical studies or clinical trials for our product candidates either prior to or post-approval, or it may object to elements of our clinical development program, requiring their alteration.
Of the large number of products in development across the pharmaceutical industry, only a small percentage successfully complete the FDA or comparable foreign regulatory authorities approval processes and receiving marketing authorization. The lengthy approval or marketing authorization process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval or marketing authorization to market our product candidates, which would significantly harm our business, financial condition, results of operations and prospects..
Even if we eventually complete clinical testing and receive approval of a new drug application or foreign marketing for our product candidates, the FDA or the comparable foreign regulatory authorities may grant approval or other marketing authorization contingent on the performance of costly additional clinical trials, including post-market clinical trials. The FDA or the comparable foreign regulatory authorities also may approve or authorize for marketing a product candidate for a more limited indication or patient population than we originally request, and the FDA or comparable foreign regulatory authorities may not approve or authorize the labeling that we believe is necessary or desirable for the successful commercialization of a product candidate. Any delay in obtaining, or inability to obtain, applicable regulatory approval or other marketing authorization would delay or prevent commercialization of that product candidate and would adversely impact our business and prospects.
In addition, the FDA or comparable foreign regulatory authorities may change their policies, adopt additional regulations, revise existing regulations or guidance or take other actions, which may prevent or delay approval of our future product candidates under development on a timely basis. Such policy or regulatory changes could impose additional requirements upon us that could delay our ability to obtain approvals, increase the costs of compliance or restrict our ability to maintain any marketing authorizations we may have obtained.
The development of our product candidates also may be delayed by other events beyond our control. For example, actions to limit federal agency budgets or personnel may result in reductions to the FDA’s budget, employees, and operations, as well as changes to FDA regulatory programs, all of which may lead to slower response times and longer review periods, potentially affecting our ability to progress development of our product candidates, undergo regulatory inspections or obtain regulatory approval for our product candidates.
Furthermore, even if we obtain regulatory approval for our product candidates, we will still need to develop a commercial organization, establish a commercially viable pricing structure and obtain approval for coverage and adequate reimbursement from third-party and government payors, including government health administration authorities. If we are unable to successfully commercialize our product candidates, we may not be able to generate sufficient revenue to continue our business.
Inadequate funding for the FDA, the National Institutes of Health and other government agencies, including from government shutdowns, or other disruptions to these agencies’ staffing and operations, could prevent new products and services from being developed or commercialized in a timely manner or at all, which could negatively impact our business.
Currently, federal agencies in the U.S. are operating under a continuing resolution that is set to expire on September 30, 2025 and the current U.S. administration is focused on reducing costs of the federal government generally, including significantly reducing the number of government employees. Without appropriation of additional funding to federal agencies, our business operations related to our product development activities for the U.S. market could be impacted. The ability of the FDA to review and approve new products and National Institutes of Health (“NIH”)’s ability to conduct and partner with industry on important research can be affected by a variety of factors, including government budget and funding levels, payment of user fees and reauthorization of user fee programs, staffing and other resource limitations, ability to hire and retain key personnel, layoffs, as well as statutory, regulatory and policy changes. In addition, funding of other government agencies that support research and development activities that pertain
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to FDA review, such as research to understand new technologies or establish new standards, is subject to the political process, which is inherently fluid and unpredictable. Such government agencies also have been subject to reductions in funding and downsizing of agency staffing levels, which could materially impact our business and operations. .
The current administration has implemented or proposed policies that may affect the FDA review process, including efforts to downsize the federal workforce, remove job elimination protections for federal workers, limit certain communications, and potentially impact user fee reauthorization. Some of these efforts have manifested to date in the form of personnel measures that could impact the FDA’s ability to hire and retain key personnel, which could result in delays or limitations on our ability to obtain guidance from the FDA on our product candidates in development and obtain the requisite regulatory approvals in the future. Moreover, the current administration has proposed action to freeze or reduce the budget of the NIH as related to its funding for medical research, which could decrease the ability of facilities that rely on NIH funding to enroll and conduct clinical trials or increase the costs to us of conducting clinical trials. If political pressure or global health concerns prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
There remains substantial uncertainty as to how regulatory reform measures being implemented by the current U.S. administration, and other political developments, such as government shutdowns or work stoppages, would impact other U.S. regulatory agencies, such as the FDA, SEC and U.S. Patent and Trademark Office (“USPTO”), on which our operations rely. For example, over the last several years, the U.S. government has shut down and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical employees and stop critical activities. In addition, the current U.S. administration has proposed substantial reductions in force at various government agencies that, if applied in a material way, could significantly reduce the FDA’s and other agencies’ capacities to perform their functions in a manner consistent with past practices. If a prolonged government shutdown occurs or if the FDA, NIH, SEC or the USPTO experiences significant decreases in funding or personnel, it could significantly impact the ability of the FDA to issues licenses needed for conduct of our clinical trials, the NIH to conduct research or provide grants, and the abilities of the FDA and the USPTO to timely review and process our regulatory submissions, which could have a material adverse effect on our business and our timelines. Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
We or Advanz Pharma may fail to perform under any of the agreements entered into in connection with the partnership for the potential commercialization of AT-007, which may subject us to liabilities, and we may fail to achieve anticipated benefits of the partnership.
In January 2023, we announced a partnership with Advanz Pharma ("Advanz") for the potential commercialization of AT-007 (govorestat) in Europe, and entered into an Exclusive License and Supply Agreement ("Advanz Agreement") with Advanz. Under the terms of the Advanz Agreement, Advanz receives exclusive commercial rights in the European Economic Area, Switzerland, and the UK (Territory) for AT-007 in Classic Galactosemia and SORD Deficiency, with certain rights to future indications for AT-007 in the Territory. In return, we have the right to receive certain near-term development milestone payments upon clinical trial completion and marketing authorization in Europe as well as commercial sales milestones, which in the aggregate are expected to amount to over €130 million. We also have the right to receive royalties on any future net sales of AT-007 in the Territory of 20%. The royalty rate will be payable on a country-by-country basis until the later of (i) the expiration of the licensed patents covering the composition of matter of AT-007, or (ii) 10 years after the European Medicines Agency’s grant of marketing authorization for AT-007. The royalties are subject to certain deductions, including certain secondary finishing costs, certain step-in establishment costs and a portion of fees for any potential third-party patent licenses if applicable in the future. Following the initial term of the license, as described above, the royalty rate shall be reduced to 10% and shall continue in perpetuity unless the Advanz Agreement is terminated in various circumstances in accordance with its terms. We will continue to be responsible for the development, manufacturing and supply of AT-007, and Advanz will be responsible for packaging, distribution and commercialization in the Territory. The Advanz Agreement includes a sublicense under the 2016 Columbia Agreement and the 2020 Miami License Agreement.
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Our partnership with Advanz is subject to various risks, including but not limited to the following:
Any of these factors could cause us to incur higher costs, disrupt the supply of our product candidates or approved products, delay or prevent the approval of our product candidates or prevent or disrupt the commercialization of our approved products. As a result, we may not achieve some or all economic benefits expected from the partnership.
The development of additional product candidates is risky and uncertain, and we can provide no assurances that we will be able to replicate our approach to drug development for other disease indications.
Efforts to identify, acquire or in‑license, and then develop, product candidates require substantial technical, financial and human resources, whether or not any product candidates are ultimately identified. Our efforts may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development, approved products or commercial revenues for many reasons, including the following:
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We have limited financial and management resources and, as a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater market potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial drugs or profitable market opportunities. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in circumstances under which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate. In addition, we may not be successful in replicating our approach to drug development for other disease indications. If we are unsuccessful in identifying and developing additional product candidates or are unable to do so, our business may be harmed.
Success in preclinical studies or earlier clinical trials may not be indicative of results in future clinical trials and we cannot assure you that any ongoing, planned or future clinical trials will lead to results sufficient for the necessary regulatory approvals.
Success in preclinical testing and earlier clinical trials does not ensure that later clinical trials will generate the same results or otherwise provide adequate data to demonstrate the efficacy and safety of a product candidate. Preclinical studies and Phase 1 clinical trials are primarily designed and operate to test safety, to study pharmacokinetics and pharmacodynamics and to understand the side effects of product candidates at various doses and schedules. Success in preclinical studies and earlier clinical trials does not ensure that later efficacy trials will be successful, nor does it predict final results. Our product candidates may fail to show the desired safety and efficacy in clinical development despite positive results in preclinical studies or having successfully advanced through earlier clinical trials.
In addition, the design of a clinical trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. As an organization, we have limited experience designing clinical trials and may be unsuccessful in designing and executing a clinical trial to support regulatory approval Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in preclinical testing and earlier clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. In addition, we may experience regulatory delays or rejections as a result of many factors, including changes in regulatory policy during the period of our product candidate development. Any such delays could negatively impact our business, financial condition, results of operations and prospects.
Clinical drug development involves a lengthy and expensive process. We may incur additional costs and encounter substantial delays or difficulties in our clinical trials.
We may not commercialize, market, promote or sell any product candidate without obtaining marketing approval from the FDA or other comparable regulatory authority, and we may never receive such approvals, particularly following the recent Complete Response Letter received from the FDA for the NDA for govorestat for the treatment of Classic Galactosemia. It is impossible to predict when or if any of our product candidates will prove effective or safe in humans and will receive regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, is difficult to design and implement, can take many years to complete and is uncertain as to outcome.
A failure of one or more clinical trials can occur at any stage of testing. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.
We may experience numerous unforeseen events prior to, during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including the following:
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Any inability to successfully complete preclinical and clinical development could result in additional costs to us or impair our ability to generate revenue from future drug sales or other sources. In addition, if we make manufacturing or formulation changes to our product candidates, we may need to conduct additional testing to bridge our modified product candidate to earlier versions. Clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates, if approved, or allow our competitors to bring competing drugs to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business, financial condition, results of operations and prospects.
Additionally, if the results of our clinical trials are inconclusive or if there are safety concerns or serious adverse events associated with our product candidates, we may:
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Our product development costs will also increase if we experience delays in testing or obtaining marketing approvals. We do not know whether any of our preclinical studies or clinical trials will begin as planned, need to be restructured or be completed on schedule, if at all.
Further, we, the FDA or an IRB may suspend our clinical trials at any time if it appears that we or our collaborators are failing to conduct a trial in accordance with regulatory requirements, including the FDA’s GCP regulations, that we are exposing participants to unacceptable health risks, or if the FDA finds deficiencies in our investigational new drug applications ("INDs") or the conduct of these trials. In November 2024, the FDA issued a Complete Response Letter for our NDA seeking approval of govorestat for the treatment of Classic Galactosemia citing deficiencies in the clinical application. We cannot predict with any certainty the schedule for commencement and completion of future clinical trials. If we experience delays in the commencement or completion of our clinical trials, or if we terminate a clinical trial prior to completion, the commercial prospects of our product candidates could be negatively impacted, and our ability to generate revenues from our product candidates may be delayed.
All of our current product candidates that have proceeded to clinical trials target inhibition of aldose reductase. There can be no assurance that aldose reductase inhibitors will ever receive regulatory approval.
All of our current product candidates that have proceeded to clinical trials target inhibition of the aldose reductase enzyme. The FDA may not agree with this proposed mechanism of action for the indications we are pursuing, which could impact the amount of evidence the FDA requires to support marketing approval. There are no currently approved aldose reductase inhibitors on the market outside of Japan, India, and China, and there can be no assurance that aldose reductase inhibitors will ever receive regulatory approval in other countries, including the United States. Prior attempts to inhibit this enzyme were hindered by nonselective, nonspecific inhibition, which resulted in limited efficacy and significant off-target safety effects. Our current product candidates may face similar or different challenges that prevent their successful commercialization.
We may not be able to obtain or maintain rare pediatric disease designation or exclusivity for our product candidates, which could limit the potential profitability of our product candidates.
We have obtained orphan drug designation and rare pediatric disease designation, from the FDA for AT‑007 for the treatment of Galactosemia and PMM2-CDG. The FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which is defined as a disease or condition that either affects fewer than 200,000 individuals in the United States, or if it affects more than 200,000 individuals, there is no reasonable expectation that sales of the drug in the United States will be sufficient to offset the costs of developing and making the drug available in the United States. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
For the purposes of the rare pediatric disease program, a “rare pediatric disease” is a serious or life-threatening disease in which the serious or life-threatening manifestations primarily affect individuals aged from birth to 18 years or a rare disease or conditions within the meaning of the Orphan Drug Act. Under the FDA’s rare pediatric disease priority review voucher, or RPD-PRV, program, upon the approval of an NDA for the treatment of a rare pediatric disease, the sponsor of such application may be eligible for an RPD-PRV that can be used to obtain priority review for a subsequent NDA or Biologics License Application (BLA). A rare pediatric disease designation does not guarantee that a sponsor
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will receive a PRV upon approval of its application. If an RPD-PRV is received, it may be sold or transferred an unlimited number of times. However, the FDA’s rare pediatric disease priority voucher program began to sunset on December 20, 2024, upon Congress’ failure to pass a continuing resolution package that included its reauthorization. Under the amended statutory sunset provisions, after December 20, 2024, the FDA may award an RPD-PRV for an approved rare pediatric disease product application only if the sponsor has rare pediatric disease designation for the drug and if that designation was granted by December 20, 2024. After September 30, 2026, the FDA may not award any rare pediatric disease PRVs. Congress may vote to reauthorize this program, but its future remains unknown at this time.
A breakthrough therapy designation by the FDA for a product candidate may not lead to a faster development or regulatory review or approval process, and it would not increase the likelihood that the product candidate will receive marketing approval.
We may seek a breakthrough therapy designation for one or more product candidates. A breakthrough therapy is defined as a product candidate that is intended, alone or in combination with one or more other drugs, to treat a serious or life‑threatening disease or condition, and preliminary clinical evidence indicates that the product candidate may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For product candidates that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Product candidates designated as breakthrough therapies by the FDA are also eligible for priority review if supported by clinical data at the time of the submission of the NDA.
Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe that one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a breakthrough therapy designation for a product candidate may not result in a faster development process, review or approval compared to product candidates considered for approval under conventional FDA procedures and it would not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that the product candidate no longer meets the conditions for qualification or it may decide that the time period for FDA review or approval will not be shortened. We also are unable to predict the potential changes in regulatory interpretations or agency funding or staffing that may impact the FDA’s use or implementation of the Breakthrough Therapy designation.
We have sought, and may in the future seek, fast track designation from the FDA for our product candidates. Even if granted, fast track designation may not actually lead to a faster development, regulatory review or approval process.
If a product candidate is intended for the treatment of a serious or life-threatening condition and demonstrates the potential to address unmet needs for this condition, the sponsor may apply for FDA fast track designation. If fast track designation is obtained, the FDA may prioritize interactions with the sponsor concerning the designated development program and initiate review of sections of an NDA before the application is complete, known as “rolling review.” Fast track designation would not ensure that we would experience a faster development, regulatory review or approval process compared to conventional FDA procedures or that we would ultimately obtain regulatory approval. Additionally, the FDA may withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical development program. We also are unable to predict the potential changes in regulatory interpretations or agency funding or staffing that may impact the FDA’s use or implementation of the fast track designation.
We may seek approval from the FDA under the accelerated approval pathway. If we are unable to obtain accelerated approval, we may be required to conduct additional preclinical studies or clinical trials, which could increase the expense of obtaining, reduce the likelihood of obtaining and/or delay the timing of obtaining, necessary marketing approvals. Even if we receive accelerated approval from the FDA for a product candidate, if our confirmatory trials do not verify clinical benefit, or if we do not comply with rigorous post-marketing requirements, the FDA may seek to withdraw accelerated approval.
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We intend to seek efficient pathways to approval for our product candidates, which may include the accelerated approval pathway. Under the accelerated approval provisions of the Federal Food, Drug, and Cosmetic Act, or the FDCA, and the FDA’s implementing regulations, the FDA may grant accelerated approval to a product designed to treat a serious or life-threatening condition that provides meaningful therapeutic advantage over available therapies and demonstrates an effect on a surrogate endpoint or intermediate clinical endpoint that is reasonably likely to predict clinical benefit. The FDA considers a clinical benefit to be a positive therapeutic effect that is clinically meaningful in the context of a given disease. For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. An intermediate clinical endpoint is a clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit. The accelerated approval development pathway may be used in cases in which the advantage of a new drug over available therapy may not be a direct therapeutic advantage, but is a clinically important improvement from a patient and public health perspective. Products approved under the accelerated approval pathway are still required to meet the evidentiary standards for approval, including substantial evidence of effectiveness based on adequate and well-controlled studies.
If granted, accelerated approval is contingent on the sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the drug’s clinical profile or risks and benefits for accelerated approval. The FDA has indicated its general expectation that any such confirmatory studies be initiated or substantially underway prior to the submission of an application for accelerated approval, and issued guidance as to what constitutes such a study being “underway.” If such post-approval studies fail to confirm the drug’s clinical profile or risks and benefits, the FDA may withdraw its approval of the drug. The Food and Drug Omnibus Reform Act, or FDORA, which was signed into law on December 29, 2022, made amendments to the accelerated approval program, among them new requirements relating to post-approval studies and enhanced enforcement and withdrawal authorities for the FDA, including in the event that a sponsor fails to comply with applicable requirements under the program. We can provide no assurances that our biomarker-based approach will be successful in demonstrating a predictive benefit in relevant clinical outcomes we are evaluating. If our approach is not successful, we may be required to conduct longer, different, or additional clinical trials, which also may fail to confirm clinical benefit.
If we choose to pursue accelerated approval, we intend to seek feedback from the FDA or will otherwise evaluate our ability to seek and receive such accelerated approval. There can be no assurance that, after our evaluation of the feedback from the FDA or other factors, we will decide to pursue or submit an NDA for accelerated approval or any other form of expedited development, review or approval. Submitting an application for accelerated approval, does not assure that the application will be accepted or that approval will be granted on a timely basis, or at all. The FDA also could require us to conduct further studies or trials prior to considering our application or granting approval of any type. We might not be able to fulfill the FDA’s requirements in a timely manner, which would cause delays, or approval might not be granted because our submission is deemed incomplete by the FDA. A failure to obtain accelerated approval or any other form of expedited development, review or approval for a product candidate may result in a longer time period to commercialize such product candidate, could increase the cost of development of such product candidate and could harm our competitive position in the marketplace.
Even if we receive accelerated approval from the FDA, we will be subject to rigorous post-marketing requirements, including the completion of confirmatory post-market clinical trial(s) to verify the clinical benefit of the product, and submission to the FDA of all promotional materials prior to their dissemination. The FDA could seek to withdraw accelerated approval for multiple reasons, including if we fail to conduct any required post-market study with due diligence, a post-market study does not confirm the predicted clinical benefit, other evidence shows that the product is not safe or effective under the conditions of use, or we disseminate promotional materials that are found by the FDA to be false or misleading.
A failure to obtain accelerated approval or any other form of expedited development, review or approval for a product candidate that we may choose to develop would result in a longer time period prior to commercializing such product candidate, could increase the cost of development of such product candidate and could harm our competitive position in the marketplace.
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Enrollment and retention of patients in clinical trials is an expensive and time‑consuming process and could be delayed, made more difficult or rendered impossible by multiple factors outside our control.
Identifying and qualifying patients to participate in our clinical trials is critical to our success. We may encounter difficulties in enrolling patients in our clinical trials, thereby delaying or preventing development and approval of our product candidates. Even once enrolled, we may be unable to retain a sufficient number of patients to complete any of our trials. Patient enrollment and retention in clinical trials depends on many factors, including the size of the patient population, the nature of the trial protocol, the existing body of safety and efficacy data, the number and nature of competing treatments and ongoing clinical trials of competing therapies for the same indication, the proximity of patients to clinical sites and the eligibility criteria for the trial. Because our focus includes rare disorders, there are limited patient pools from which to draw in order to complete our clinical trials in a timely and cost‑effective manner. Accordingly, enrollment of our clinical trials could take significantly longer than projected, which would delay any potential approval of our product candidates. Furthermore, even if we are able to enroll a sufficient number of patients for our clinical trials, we may have difficulty maintaining enrollment of such patients in our clinical trials.
Our efforts to build relationships with patient communities may not succeed, particularly following the Complete Response Letter for govorestat for Classic Galactosemia and Warning Letter relating to our AT-007-1002 study received from the FDA in November 2024, which could result in delays in patient enrollment in our clinical trials. Any negative results we may report in clinical trials of our product candidates may make it difficult or impossible to recruit and retain patients in other clinical trials of that same product candidate. Delays or failures in planned patient enrollment or retention may result in increased costs, program delays or both, which could have a harmful effect on our ability to develop our product candidates or could render further development impossible. In addition, we may rely on CROs and clinical trial sites to ensure proper and timely conduct of our future clinical trials and, while we intend to enter into agreements governing their services, we will be limited in our ability to ensure their actual performance.
Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit their commercial potential or result in significant negative consequences following any potential marketing approval.
During the conduct of clinical trials, patients report changes in their health, including illnesses, injuries and discomforts, to their doctor. Often, it is not possible to determine whether or not the product candidate being studied caused these conditions. Regulatory authorities may draw different conclusions or require additional testing to confirm these determinations, if they occur.
In addition, it is possible that as we test our product candidates in larger, longer and more extensive clinical trials, or as use of these product candidates becomes more widespread if they receive regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier trials, as well as conditions that did not occur or went undetected in previous trials, will be reported by subjects or patients. Many times, side effects are only detectable after investigational drugs are tested in large‑scale pivotal trials or, in some cases, after they are made available to patients on a commercial scale after approval. If additional clinical experience indicates that any of our product candidates have side effects or cause serious or life‑threatening side effects, the development of the product candidate may fail or be delayed, or, if the product candidate has received regulatory approval, such approval may be revoked, which would harm our business, prospects, operating results and financial condition.
Interim, “top-line” and preliminary data from our clinical trials that we have announced or published, has changed and may continue to change as more patient data becomes available and are subject to audit and verification procedures that has resulted and could in the future result in material changes in the final data.
We have published interim, “top-line” or preliminary data from our clinical trials and may continue to do it from time to time. Interim data from clinical trials that we have completed and may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues, more patient data become available, and/or additional analyses are conducted, as has occurred in the past. Preliminary or “top-line” data remain subject to new or further audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data and results are available. Differences between preliminary or interim data and final data could
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significantly harm our business prospects and may cause the trading price of our common stock to fluctuate significantly.
For example, In May 2025, we presented full 12-month clinical results and topline 18 and 24-month patient level analyses from the INSPIRE Phase 2/3 trial of govorestat for the treatment of patients with CMT-SORD. Our review and analyses of these data are ongoing.
The incidence and prevalence for target patient populations of our product candidates have not been established with precision. If the market opportunities for our product candidates are smaller than we believe they are or any approval we obtain is based on a narrower definition of the patient population, our business may suffer.
We currently focus our drug development on product candidates for the treatment of diseases with high unmet medical need. Our eligible patient population and pricing estimates may differ significantly from the actual market addressable by our product candidates. Our estimates of both the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our product candidates, are based on our beliefs and analyses. These estimates have been derived from a variety of sources, including the scientific literature, patient foundations or market research, and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of the diseases we are targeting. The number of patients may turn out to be lower than expected. Likewise, the potentially addressable patient population for each of our product candidates may be limited or may not be receptive to treatment with our product candidates, and new patients may become increasingly difficult to identify or access. If the market opportunities for our product candidates are smaller than we estimate, we may not be able to achieve our forecast revenue, which could hinder our business plan and adversely affect our business and results of operations.
We face competition, which may result in others developing or commercializing drugs before or more successfully than us.
The development and commercialization of new drugs is highly competitive. We face competition with respect to our current product candidates and may face competition with respect to any other product candidates that we may seek to develop or commercialize in the future from pharmaceutical and biotechnology companies, academic institutions, government agencies and other public and private research institutions.
Our competitors may have an advantage over us due to their greater size, resources and institutional experience. In particular, these companies have greater experience and expertise in securing reimbursement, government contracts and relationships with key opinion leaders, conducting testing and clinical trials, obtaining and maintaining regulatory approvals and distribution relationships to market products and marketing approved drugs. These companies also have significantly greater research and marketing capabilities than we do. If we are not able to compete effectively against existing and potential competitors, our business and financial condition may be harmed.
As a result of these factors, our competitors may obtain regulatory approval of their drugs before we are able to, which may limit our ability to develop or commercialize our product candidates. Our competitors may also develop therapies that are safer, more effective, more widely accepted or less expensive than ours, and may also be more successful than we are in manufacturing and marketing their drugs. These advantages could render our product candidates obsolete or non‑competitive before we can recover the costs of such product candidates’ development and commercialization.
Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and early‑stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third-parties compete with us in recruiting and retaining qualified scientific, management and commercial personnel, establishing clinical trial sites and subject registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.
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We may explore strategic collaborations that may never materialize or we may be required to relinquish important rights to and control over the development and commercialization of our product candidates to any future collaborators.
Over time, our business strategy includes acquiring or in-licensing additional product candidates for treatments of diseases with high unmet medical need. As a result, we expect that we may periodically explore a variety of possible strategic collaborations in an effort to gain access to additional product candidates or resources. These strategic collaborations may include partnerships with large strategic partners, particularly for the development of DPN treatments using AT-001. At the current time however, we cannot predict what form such a strategic collaboration might take. We are likely to face significant competition in seeking appropriate strategic collaborators, and strategic collaborations can be complicated and time consuming to negotiate and document. We may not be able to negotiate strategic collaborations on acceptable terms, or at all. We are unable to predict when, if ever, we will enter into any strategic collaborations because of the numerous risks and uncertainties associated with establishing them.
Future collaborations could subject us to a number of risks, including:
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Even if any product candidates receive marketing approval, they may fail to achieve market acceptance by physicians, patients, third party payors or others in the medical community necessary for commercial success.
Even if any product candidates receive marketing approval, they may fail to gain market acceptance by physicians, patients, third party payors and others in the medical community. If such product candidates do not achieve an adequate level of acceptance, we may not generate significant drug revenue and may not become profitable. The degree of market acceptance of any product candidate, if approved for commercial sale, will depend on a number of factors, including but not limited to:
Our efforts to educate physicians, patients, third‑party payors and others in the medical community on the benefits of our product candidates may require significant resources and may never be successful. Such efforts may require more resources than are typically required due to the complexity and uniqueness of our product candidates.
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Because we expect sales of our product candidates, if approved, to generate substantially all of our revenues for the foreseeable future, the failure of our product candidates to find market acceptance would harm our business.
Even if we obtain regulatory approvals for our product candidates, they will remain subject to ongoing regulatory oversight.
Even if we obtain regulatory approvals for our product candidates, such approvals will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record keeping and submission of safety and other post‑market information. Any regulatory approvals that we receive for our product candidates may also be subject to a risk evaluation and mitigation strategy ("REMS"), limitations on the approved indicated uses for which the drug may be marketed or to the conditions of approval, or contain requirements for potentially costly post‑marketing testing, including Phase 4 trials, and surveillance to monitor the quality, safety and efficacy of the drug. Such regulatory requirements may differ from country to country depending on where we have received regulatory approval.
In addition, drug manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current good manufacturing practices, or cGMP, requirements and adherence to commitments made in the NDA or foreign marketing application. If we, or a regulatory authority, discover previously unknown problems with a drug, such as adverse events of unanticipated severity or frequency, or problems with the facility where the drug is manufactured or if a regulatory authority disagrees with the promotion, marketing or labeling of that drug, a regulatory authority may impose restrictions relative to that drug, the manufacturing facility or us, including requesting a recall or requiring withdrawal of the drug from the market or suspension of manufacturing.
If we or our contract manufacturers or partners fail to comply with applicable regulatory requirements following approval of our product candidates, a regulatory authority may, among other actions:
Moreover, the FDA strictly regulates the promotional claims that may be made about drug products. In particular, a product may not be promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off‑label uses, and a company that is found to have improperly promoted off‑label uses may be subject to significant civil, criminal and administrative penalties.
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Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and harm our business.
Further, if we are not able to maintain regulatory compliance with the FDCA, Cures Act, or other applicable requirements, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.
The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. For example, on June 28, 2024, the U.S. Supreme Court, in Loper Bright Enterprises v. Raimondo, overturned long-standing precedent regarding the deference courts owe to agencies’ interpretation of ambiguous statutes in their rulemaking. While the impact of the Loper Bright decision on our business and regulatory strategy is unknown, the decision generally may, among other things, increase the frequency of challenges to decisions and rulemaking of health regulators, including FDA determinations of drug approval and market exclusivity and the Centers for Medicare & Medicaid Services’ rules regarding reimbursement, and also impact the speed at which such health regulators make decisions and issue regulations. Furthermore, beginning in February 2025, the Trump administration has downsized and terminated significant numbers of employees at the FDA and the NIH, along with other federal agencies. We cannot predict the effect that any such restructuring may have on our business.
In addition, we cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. For example, certain policies of the U.S. administration may impact our business and industry. It is difficult to predict how executive actions, including executive orders, may be implemented and the extent to which they will affect the FDA’s ability to exercise its regulatory authority. If legislative, administrative or executive actions impose constraints on the FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be successful in commercializing them, if and when they are approved.
To successfully commercialize any product candidate that may result from our development programs, we will need to build out our sales and marketing capabilities, either on our own or with others. The establishment and development of our own commercial team or the establishment of a contract sales force to market any product candidate we may develop will be expensive and time‑consuming and could delay any drug launch. Moreover, we cannot be certain that we will be able to successfully develop this capability. We may seek to enter into collaborations with other entities to utilize their established marketing and distribution capabilities, but we may be unable to enter into such agreements on favorable terms, if at all. If any current or future collaborators do not commit sufficient resources to commercialize our product candidates, or we are unable to develop the necessary capabilities on our own, we may be unable to generate sufficient revenue to sustain our business. We compete with many companies that currently have extensive, experienced and well‑funded marketing and sales operations to recruit, hire, train and retain marketing and sales personnel. We will likely also face competition if we seek third parties to assist us with the sales and marketing efforts of our product candidates. Without an internal team or the support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.
Even if we obtain and maintain approval for our product candidates from the FDA, we may never obtain approval outside the United States, which would limit our market opportunities.
Approval of a product candidate in the United States by the FDA does not ensure approval of such product candidate by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. Sales of our product candidates outside the United States will be subject to foreign regulatory requirements governing clinical trials and marketing approval. Even if the FDA grants marketing approval for a product candidate, comparable foreign regulatory authorities also must approve the manufacturing and marketing of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and
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more onerous than, those in the United States, including additional preclinical studies or clinical trials. In many countries outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that country. In some cases, the price that we intend to charge for any product candidates, if approved, is also subject to approval. Obtaining approval for our product candidates in the European Union from the European Commission following the opinion of the European Medicines Agency, or the EMA, is a lengthy and expensive process. Even if a product candidate is approved, the EMA may limit the indications for which the drug may be marketed, require extensive warnings on the drug labeling or require expensive and time‑consuming additional clinical trials or reporting as conditions of approval. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our product candidates in certain countries. Following receipt of the Complete Response Letter for govorestat for the treatment of Classic Galactosemia, we also withdrew the MAA to the EMA for govorestat for the treatment of Classic Galactosemia, which may result in further delays, difficulties and costs to support a European MAA for govorestat.
Further, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries. Also, regulatory approval for our product candidates may be withdrawn. If we fail to comply with the applicable regulatory requirements, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed and our business, financial condition, results of operations and prospects could be harmed.
If we commercialize our product candidates outside the United States, a variety of risks associated with international operations could harm our business.
If we obtain regulatory and marketing approval in the United States for any product candidate, we intend to seek approval to market our product candidates outside the United States. If we market approved products outside the United States, we expect that we will be subject to additional risks in commercialization, including:
We have no prior experience in these areas. In addition, there are complex regulatory, tax, labor and other legal requirements imposed by many of the individual countries in which we may operate, with which we will need to comply. Further, there have been, and may continue to be, significant changes to U.S. trade policies, sanctions, legislation, treaties and tariffs, including, but not limited to, trade policies and tariffs affecting products from outside of the U.S. The
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extent and duration of increased tariffs and the resulting impact on general economic conditions and on our business are uncertain and will depend on various factors, such as negotiations between the U.S. and affected countries, the responses of other countries or regions, exemptions or exclusions that may be granted, availability and cost of alternative sources of supply, and demand in affected markets. Supply chain disruptions and delays as a result of any new tariff policies or trade restrictions could also negatively impact our cost of materials and production processes. Many biopharmaceutical companies have found the process of marketing their products in foreign countries to be challenging.
Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization of any product candidate that we may develop.
We face an inherent risk of product liability exposure related to the testing of our product candidates in clinical trials and may face an even greater risk if we commercialize any product candidate that we may develop. If we cannot successfully defend ourselves against claims that any such product candidates caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
Any such outcomes could negatively impact our business, financial condition, results of operations and prospects.
Our insurance policies may be inadequate and potentially expose us to unrecoverable risks.
Although we maintain product liability insurance coverage, such insurance may not be adequate to cover all liabilities that we may incur. We anticipate that we will need to increase our insurance coverage each time we commence a clinical trial and if we successfully commercialize any product candidate. Insurance availability, coverage terms and pricing continue to vary with market conditions. We endeavor to obtain appropriate insurance coverage for insurable risks that we identify; however, we may fail to correctly anticipate or quantify insurable risks, we may not be able to obtain appropriate insurance coverage and insurers may not respond as we intend to cover insurable events that may occur. We have observed rapidly changing conditions in the insurance markets relating to nearly all areas of traditional corporate insurance. Such conditions have resulted in higher premium costs, higher policy deductibles, and lower coverage limits. For some risks, we may not have or maintain insurance coverage because of cost or availability.
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Risks Related to Regulatory Compliance
Our relationships with customers, physicians, and third party payors are subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, health information privacy and security laws, and other healthcare laws and regulations. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
Healthcare providers, physicians and third‑party payors in the United States and elsewhere will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our current and future arrangements with healthcare professionals, principal investigators, consultants, customers and third‑party payors subject us to various federal and state fraud and abuse laws and other healthcare laws, including, without limitation, the federal Anti‑Kickback Statute, the federal civil and criminal false claims laws and the law commonly referred to as the Physician Payments Sunshine Act and regulations.
Ensuring that our business arrangements with third-parties comply with applicable healthcare laws and regulations will likely be costly. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participating in government‑funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of noncompliance with these laws, contractual damages, reputational harm and the curtailment or restructuring of our operations.
If the physicians or other providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government‑funded healthcare programs. Even if resolved in our favor, litigation or other legal proceedings relating to healthcare laws and regulations may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common shares. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development, manufacturing, sales, marketing or distribution activities. Uncertainties resulting from the initiation and continuation of litigation or other proceedings relating to applicable healthcare laws and regulations could have an adverse effect on our ability to compete in the marketplace.
We may obtain health information from third parties, including research institutions from which we obtain clinical trial data, that are subject to privacy and security requirements under HIPAA, and depending on the facts and circumstances, we could be subject to significant penalties if we obtain, use or disclose individually identifiable health information in a manner that is not authorized or permitted by HIPAA.
Coverage and adequate reimbursement may not be available for our product candidates, which could make it difficult for us to sell profitably, if approved.
Market acceptance and sales of any product candidates that we commercialize, if approved, will depend in part on the extent to which reimbursement for these drugs and related treatments will be available from third‑party payors, including government health administration authorities, managed care organizations and other private health insurers. Third‑party payors decide which therapies they will pay for and establish reimbursement levels. While no uniform policy for coverage and reimbursement exists in the United States, third‑party payors often rely upon Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies. However, decisions regarding the extent of coverage and amount of reimbursement to be provided for any product candidates that we develop will be made on a payor‑by‑payor basis. Therefore, one payor’s determination to provide coverage for a drug does not assure that other payors will also provide coverage, and adequate reimbursement, for the drug. Additionally, a third‑party payor’s decision to provide coverage for a therapy does not imply that an adequate reimbursement rate will be approved. Each payor determines whether or not it will provide coverage for a therapy, what amount it will pay the manufacturer for the therapy, and on what tier of its formulary it will be placed. The position on a payor’s list of covered drugs, or
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formulary, generally determines the co‑payment that a patient will need to make to obtain the therapy and can strongly influence the adoption of such therapy by patients and physicians. Patients who are prescribed treatments for their conditions and providers prescribing such services generally rely on third‑party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our product candidates, if approved, unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products.
Third‑party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. We cannot be sure that coverage and reimbursement will be available for any drug that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Inadequate coverage and reimbursement may impact the demand for, or the price of, any drug for which we obtain marketing approval. If coverage and adequate reimbursement are not available, or are available only at limited levels, we may not be able to successfully commercialize any product candidates that we develop.
Due to general uncertainty with respect to the current legal, regulatory and policy environment, we are unable to predict the impact of any future legislative, regulatory, third-party payor or policy actions. If enacted, we and any third parties we might engage may be unable to adapt to any changes implemented as a result of such measures, and we could face difficulties in maintaining or increasing profitability or otherwise experience a material adverse impact on our business, financial condition and results of operations.
Healthcare reform measures may have a negative impact on our business and results of operations.
In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes, as well as judicial challenges, regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect our ability to profitably sell any product candidates for which we obtain marketing approval. The increased emphasis on managed healthcare in the U.S. and on country-specific and national pricing and reimbursement controls in the EU will put additional pressure on product pricing, reimbursement and usage, which may adversely affect our future product sales and results of operations. These pressures can arise from rules and practices of managed care groups, judicial decisions and governmental laws and regulations related to Medicare, Medicaid and healthcare reform, pharmaceutical reimbursement policies and pricing in general. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing coverage and/or reimbursement controls and measures, could have a material adverse impact on our net product revenues and results of operations.
In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. For example, since 2003, Medicare coverage for drug purchases by the elderly have been subject to a reimbursement methodology based on average sales prices for physician-administered drugs. In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class. Cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for any approved products. While the Managed Medical Assistant ("MMA") program applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private payors.
Further, in March 2010, the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the "PPACA"), was passed, which substantially changed the way healthcare is financed by both governmental and private payors in the United States. Some of the provisions of the PPACA have yet to be fully implemented, while certain provisions have been subject to executive, judicial and Congressional challenges. For example, a case challenging the PPACA’s requirement that insurers cover certain preventative services is currently pending before the U.S. District Court for the Northern District of Texas. In March 2023, the judge struck down the requirement, and, on appeal, in June 2024 the U.S. Court of Appeals for the Fifth Circuit held, among other things, that the PPACA’s requirement that group health plans and health insurance issuers cover certain preventative services without cost-sharing is unconstitutional. The parties have petitioned to appeal the case to the U.S. Supreme Court, which granted certiorari in January 2025. It is unclear how this decision, subsequent decisions and appeals, or any potential future litigation, executive orders or other actions by the current administration, and other efforts to repeal and replace the PPACA will impact the PPACA. Congress may consider additional legislation
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to repeal or repeal and replace other elements of the PPACA. We continue to evaluate the effect that the PPACA and its possible repeal and replacement may have on our business and the potential profitability of our product candidates.
Other legislative changes have been proposed and adopted since the PPACA was enacted. These changes include aggregate reductions to Medicare payments to providers of 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013, and due to subsequent legislative amendments to the statute, including the Bipartisan Budget Act ("BBA"), which will remain in effect through 2027 unless additional Congressional action is taken. The American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
The current Trump administration has taken additional action to limit or change healthcare policies pursued by the prior Biden Administration. For example, President Trump rescinded an executive order issued by former President Biden, pursuant to which the Center for Medicare and Medicaid Innovation ("CMMI") created three drug pricing experiments, and it is unclear whether CMMI will continue to pursue some or any of these models or that other changes may occur under the current administration. Beginning in February 2025, the Trump administration has downsized and terminated significant numbers of employees at the FDA and the NIH, along with other federal agencies. We cannot predict the impact that any such restructuring may have on our business.
Additional changes that may affect our business include the expansion of programs such as Medicare payment for performance initiatives for physicians under the Medicare Access and CHIP Reauthorization Act of 2015. At this time, the full impact of the introduction of the Medicare quality payment program on overall physician reimbursement is unclear.
Further, in the United States there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under government payor programs, and review the relationship between pricing and manufacturer patient programs. While some of the proposed measures will require authorization through additional legislation to become effective, the U.S. Congress have indicated that they will continue to seek new legislative and/or administrative measures to control drug costs. For example, the Inflation Reduction Act of 2022 (the "IRA") also seeks to reduce prescription drug costs by, among other provisions, allowing Medicare to negotiate prices for certain high-cost prescription drugs in Medicare Parts B and D, imposing an excise tax on pharmaceutical manufacturers that refuse to negotiate pricing with Medicare, requiring inflation rebates to limit annual drug price increases in Medicare, redesigning the Medicare Part D formula, and limiting cost-sharing for insulin products. It is unclear how the IRA will be effectuated or changed under the new Trump Administration or the degree of impact that the IRA may ultimately have upon our business, or whether additional drug pricing and other healthcare reform measures will be enacted, and if enacted, what effect they would have on our business. We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demand for our current or any future product candidates or additional pricing pressures. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action in the United States or any other jurisdiction. If we or any third parties we may engage are slow or unable to adapt to changes in existing or new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, our current or any future product candidates we may develop may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.
At the state level, legislatures and regulatory agencies have increasingly passed legislation and implemented regulations designed to control drug pricing, including restrictions on pricing or reimbursement at the state government level, limitations on discounts to patients, advance notices of price increases, marketing cost disclosure and transparency measures, and, in some cases, policies to encourage importation from other countries (subject to federal approval) and bulk purchasing.
We expect that these and other healthcare reform measures that may be adopted in the future may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved drug, which could have an adverse effect on demand for our product candidates if they are approved. Any reduction in
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reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our product candidates.
Risks Related to Our Dependence on Third Parties
One of our clinical investigators received a warning letter from the FDA following a site inspection. Failure to resolve the matters addressed in the warning letter and any similar issues at other clinical trial sites could negatively impact the continuance of our govorestat clinical program, our ability to rely on the data collected in our clinical trials for regulatory submissions and approval, and our ability to undertake clinical trials in the future or timely complete future NDA submissions.
In November 2024, one of our clinical investigators received a warning letter (the "Clinical Investigator Warning Letter") from the FDA relating to our AT-007-1002 study, following a site inspection in April 2024. The inspection was conducted as a part of the FDA’s Bioresearch Monitoring Program. The Clinical Investigator Warning Letter identified issues with the clinical investigator’s compliance with the FDA requirements and regulations governing clinical investigations. Specifically, the Clinical Investigator Warning Letter cited deviations from the investigational plan. If we are unable to sufficiently establish to the FDA that our current or future clinical trials are and will be conducted in accordance with FDA requirements, Applied (and our clinical investigators) may be subject to additional FDA enforcement action including being subject to the FDA’s Application Integrity Policy. For more information on the Warning Letter we received from the FDA and the implications of being subject to the FDA’s Application Integrity Policy, please see “Risks Related to Our Operations, Employee Matters and Managing Growth – We received a Warning Letter from the FDA for our NDA filed in December 2023 for our AT-007-1002 study. Failure to resolve the matters addressed in the Warning Letter could negatively impact our company’s ability to undertake clinical trials in the future or timely complete future NDA submissions.”
We rely on third parties to produce clinical and commercial supplies of our product candidates.
We do not own or operate facilities for drug manufacturing, storage and distribution, or testing. We are dependent on third parties to manufacture the clinical supplies of our current and any future product candidates. The facilities used by our contract manufacturers to manufacture our product candidates must be approved by the FDA pursuant to inspections that will be conducted after we submit our NDA to the FDA. We do not control the manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with the cGMP requirements, for manufacture of both active drug substance and finished drug product. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, we will not be able to secure and/or maintain regulatory approval for our product candidates. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved. Any significant delay in the supply of a product candidate, or the raw material components thereof, for an ongoing clinical trial due to the need to replace a third‑party manufacturer could considerably delay completion of our clinical trials, product testing and potential regulatory approval of our product candidates.
We also intend to rely on third‑party manufacturers to supply us with sufficient quantities of our product candidates to be used, if approved, for commercialization. We do not yet have a commercial supply agreement for commercial quantities of drug substance or drug product. If we are not able to meet market demand for any approved product, it would negatively impact our ability to generate revenue, harm our reputation, and could have an adverse effect on our business and financial condition.
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Further, our reliance on third‑party manufacturers entails risks to which we may not be subject if we manufactured product candidates ourselves, including:
In addition, if we enter into a strategic collaboration with a third party for the commercialization of our current or any future product candidates, we will not be able to control the amount of time or resources that they devote to such efforts. If any strategic collaborator does not commit adequate resources to the marketing and distribution of our product candidates, it could limit our potential revenues.
Any of these events could lead to clinical trial delays or failure to obtain regulatory approval, or impact our ability to successfully commercialize our current or any future product candidates once approved. Some of these events could be the basis for FDA action, including injunction, request for recall, seizure, or total or partial suspension of production.
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Our business involves the use of hazardous materials and we and our third‑party manufacturers and suppliers must comply with environmental, health and safety laws and regulations, which can be expensive and restrict how we do, or interrupt our, business.
Our research and development activities and our third‑party manufacturers’ and suppliers’ activities involve the generation, storage, use and disposal of hazardous materials, including the components of our product candidates and other hazardous compounds and wastes. We and our manufacturers and suppliers are subject to environmental, health and safety laws and regulations governing, among other matters, the use, manufacture, generation, storage, handling, transportation, discharge and disposal of these hazardous materials and wastes and worker health and safety. In some cases, these hazardous materials and various wastes resulting from their use are stored at our and our manufacturers’ facilities pending their use and disposal. We cannot eliminate the risk of contamination or injury, which could result in an interruption of our commercialization efforts, research and development efforts and business operations, damages and significant cleanup costs and liabilities under applicable environmental, health and safety laws and regulations. We also cannot guarantee that the safety procedures utilized by our third‑party manufacturers for handling and disposing of these materials and wastes generally comply with the standards prescribed by these laws and regulations. We may be held liable for any resulting damages, costs or liabilities, which could exceed our resources, and state or federal or other applicable authorities may curtail our use of certain materials and/or interrupt our business operations. Furthermore, environmental, health and safety laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. Failure to comply with these environmental, health and safety laws and regulations may result in substantial fines, penalties or other sanctions. We do not currently carry environmental insurance coverage.
We rely on third-parties to conduct, supervise and monitor our preclinical studies and clinical trials, and if those third parties perform in an unsatisfactory manner, it may harm our business.
We do not currently have the ability to independently conduct any clinical trials. We have relied and intend to rely on CROs and clinical trial sites to ensure the proper and timely conduct of our preclinical studies and clinical trials, and we expect to have limited influence over their actual performance. We rely upon CROs to monitor and manage data for our clinical programs, as well as the execution of future preclinical studies. We expect to control only certain aspects of our CROs’ activities. Nevertheless, we are responsible for ensuring that each of our preclinical studies and clinical trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities.
We and our CROs are required to comply with the good laboratory practices ("GLPs"), and good clinical practices ("GCPs"), which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities in the form of International Conference on Harmonization guidelines for any of our product candidates that are in preclinical and clinical development. Regulatory authorities enforce GCPs through periodic inspections of trial sponsors, principal investigators and clinical trial sites. Although we rely on CROs to conduct GCP-compliant clinical trials, we remain responsible for ensuring that each of our preclinical studies and clinical trials is conducted in accordance with its investigational plan and protocol and applicable laws and regulations. If we or our CROs fail to comply with GCPs, the clinical data generated in our clinical trials may be deemed unreliable, and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. Accordingly, if our CROs fail to comply with these regulations or fail to recruit a sufficient number of subjects, we may be required to repeat clinical trials, which would delay the regulatory approval process.
In particular, one of our clinical investigators for the ACTION-Galactosemia Kids (AT-007-1002) received the Clinical Investigator Warning Letter following an inspection conducted by the FDA at her clinical site in April 2024. The Clinical Investigator Warning Letter identified issues with the clinical investigator’s compliance with the FDA requirements and regulations governing clinical investigations. Specifically, the Clinical Investigator Warning Letter cited deviations from the investigational plan. For more information, please see “Risks Related to Our Dependence on Third Parties". Failure to resolve the matters addressed in the warning letter and any similar issues at other clinical trial sites could negatively impact the continuance of our govorestat clinical program, our ability to rely on the data collected in our clinical trials for regulatory submissions and approval, and our ability to undertake clinical trials in the future or timely complete future NDA submissions.”
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Further, we experienced issues related to data collection, management, and retention with one of our vendors for AT-007-1002 that were raised in the Warning Letter to Applied. This vendor had a role in the Phase 2/3 INSPIRE trial (AT-007-1005) for SORD Deficiency; we are still investigating whether any issues with this vendor have impacted the INSPIRE trial.
In addition, a clinical trial site for the SORD Deficiency trial outside of the United States is in the process of responding to an inspection by local authorities, and we are evaluating the potential impact of such inspection on the data.
Our reliance on third parties to conduct clinical trials results in less direct control over the management of data developed through clinical trials than would be the case if we were relying entirely upon our own staff. Communicating with CROs and other third parties can be challenging, potentially leading to mistakes as well as difficulties in coordinating activities. Such parties may:
These factors may adversely affect the willingness or ability of third parties to conduct our clinical trials and may subject us to unexpected cost increases that are beyond our control. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or fail to comply with regulatory requirements, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, any product candidate that we develop. As a result, our financial results and the commercial prospects for any product candidate that we develop would be harmed, our costs could increase, and our ability to generate revenue could be delayed. While we have and will have agreements governing their activities, our CROs will not be our employees, and we will not control whether or not they devote sufficient time and resources to our future clinical and preclinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials, or other drug development activities which could harm our business. We face the risk of potential unauthorized disclosure or misappropriation of our intellectual property by CROs, which may reduce our trade secret protection and allow our potential competitors to access and exploit our proprietary technology.
If our relationship with any of these CROs terminates, we may not be able to enter into arrangements with alternative CROs or do so on commercially reasonable terms. Switching or adding additional CROs involves substantial cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can negatively impact our ability to meet our desired clinical development timelines. While we intend to carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a negative impact on our business, financial condition and prospects.
In addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA. The FDA may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the trial. The FDA may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA and may ultimately lead to the denial of marketing approval of our product candidates.
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Risks Related to Our Intellectual Property
Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues. If we breach our license agreements with Columbia University or any of the other agreements under which we acquired, or will acquire, the intellectual property rights to our product candidates, we could lose the ability to continue the development and commercialization of the related product.
The licensing of intellectual property is of critical importance to our business and to our current and future product candidates, and we expect to enter into additional such agreements in the future. In particular, our current product candidates AT‑007, AT‑001 and AT‑003 are dependent on our license agreement with The Trustees of Columbia University in the City of New York, or Columbia University. Pursuant to that license agreement with Columbia University, or the 2016 Columbia Agreement, Columbia University granted us an exclusive license under two important patent families, and a nonexclusive license to certain know‑how, owned by Columbia University to develop, manufacture or commercialize certain compounds, including AT‑001, AT‑003 and AT‑007, for the diagnosis and treatment of human and animal diseases and conditions. The license grant is worldwide, with the exception of the patent family that covers AT‑001 and AT‑003. The license grant for the patent family that covers AT‑001 and AT‑003 excludes patent rights in China, Taiwan, Hong Kong and Macao, which Columbia University has exclusively licensed to a third party. We cannot prevent Columbia University’s third party licensee from developing, manufacturing or commercializing certain compounds, including AT‑001 and AT‑003, but not including AT‑007, in China, Taiwan, Hong Kong and Macao, and we cannot develop, manufacture or commercialize AT‑001 or AT‑003 in these territories, which could have a negative effect on our business.
We do not have the right to control the preparation, filing, prosecution and maintenance of patents and patent applications covering the technology that we license under either of the Columbia Agreements. Therefore, we cannot always be certain that these patents and patent applications will be prepared, filed, prosecuted and maintained in a manner consistent with the best interests of our business. Although we have a right to have our comments considered in connection with the prosecution process, if Columbia University fails to prosecute and maintain such patents, or loses rights to those patents or patent applications as a result of its control of the prosecution activities, the rights we have licensed may be reduced or eliminated, and our right to develop and commercialize any of our product candidates that are the subject of such licensed rights could be adversely affected.
If we fail to meet our obligations under the Columbia Agreement in any material respect and fail to cure such breach in a timely fashion, then Columbia University may terminate the Columbia Agreement. If the Columbia Agreement is terminated, and we lose our intellectual property rights under the Columbia Agreement, this may result in complete termination of our product development and any commercialization efforts for the product candidates that are subject to the agreement, including AT‑007, AT‑001, and AT‑003. While we would expect to exercise all rights and remedies available to us, including seeking to cure any breach by us, and otherwise seek to preserve our rights under the Columbia Agreement, we may not be able to do so in a timely manner, at an acceptable cost or at all.
Furthermore, license agreements we enter into in the future may not provide exclusive rights to use intellectual property and technology in all relevant fields of use and in all territories in which we may wish to develop or commercialize our technology and products. As a result, we may not be able to prevent competitors from developing and commercializing competitive products in territories included in all of our licenses.
If we are unable to obtain and maintain patent protection for our product candidates and technology, or if the scope of the patent protection obtained is not sufficiently broad or robust, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize our product candidates and technology may be adversely affected.
Our success depends, in large part, on our ability to obtain and maintain patent protection in the United States and other countries with respect to our product candidates and our technology. We and our licensors have sought, and intend to seek, to protect our proprietary position by filing patent applications in the United States and abroad related to our product candidates and our technology that are important to our business.
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The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has, in recent years, been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our technology or product candidates or which effectively prevent others from commercializing competitive technologies and product candidates. Since patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we or our licensors were the first to file a patent application relating to any particular aspect of a product candidate. Furthermore, if third parties have filed such patent applications, an interference proceeding in the United States can be initiated by such third party, or by the USPTO, itself, to determine who was the first to invent any of the subject matter covered by the patent claims of our applications.
The patent prosecution process is expensive, time‑consuming and complex, and we may not be able to file, prosecute, maintain, enforce or license all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.
We or our licensors have not pursued or maintained, and may not pursue or maintain in the future, patent protection for our product candidates in every country or territory in which we may sell our products, if approved. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from infringing our patents in all countries outside the United States, or from selling or importing products that infringe our patents in and into the United States or other jurisdictions.
Moreover, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. Even if the patent applications we license or own do issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us or otherwise provide us with any competitive advantage. Our competitors or other third parties may be able to circumvent our patents by developing similar or alternative products in a non‑infringing manner.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and product candidates. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
Furthermore, our owned and in‑licensed patents may be subject to a reservation of rights by one or more third parties. For example, the research resulting in certain of our owned and in‑licensed patent rights and technology was funded in part by the U.S. government. As a result, the government may have certain rights, or march‑in rights, to such patent rights and technology. When new technologies are developed with government funding, the government generally obtains certain rights in any resulting patents, including a nonexclusive license authorizing the government to use the invention for noncommercial purposes. These rights may permit the government to disclose our confidential information to third parties and to exercise march‑in rights to use or allow third parties to use our licensed technology. The government can exercise its march‑in rights if it determines that action is necessary because we fail to achieve practical application of the government‑funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to give preference to U.S. industry. In addition, our rights in such inventions may be subject to certain requirements to manufacture products embodying such inventions in the United States. Any exercise by the government of such rights could harm our competitive position, business, financial condition, results of operations and prospects.
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Obtaining and maintaining our patent rights depends on compliance with various procedural, document submission, fee payment and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.
The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. In addition, periodic maintenance fees, renewal fees, annuity fees and various other government fees on patents and/or patent applications will have to be paid to the USPTO and various government patent agencies outside the United States over the lifetime of our owned and licensed patents and/or applications and any patent rights we may own or license in the future. We rely on our service providers or our licensors to pay these fees. The USPTO and various non‑U.S. government patent agencies require compliance with several procedural, documentary, fee payment and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply, and we are also dependent on our licensors to take the necessary action to comply with these requirements with respect to our licensed intellectual property. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, nonpayment of fees and failure to properly legalize and submit formal documents. If we or our licensors fail to maintain the patents and patent applications covering our products or technologies, we may not be able to stop a competitor from marketing products that are the same as or similar to our product candidates, which would have an adverse effect on our business. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. There are situations, however, in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the market and this circumstance could harm our business.
In addition, if we fail to apply for applicable patent term extensions or adjustments, we will have a more limited time during which we can enforce our granted patent rights. In addition, if we are responsible for patent prosecution and maintenance of patent rights in‑licensed to us, any of the foregoing could expose us to liability to the applicable patent owner.
Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.
Given the amount of time required for the development, testing and regulatory review of product candidates such as AT‑007, AT‑001, and AT‑003, patents protecting such candidates might expire before or shortly after such candidates are commercialized. We expect to seek extensions of patent terms in the United States and, if available, in other countries where we have or will obtain patent rights. In the United States, the Drug Price Competition and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years beyond the normal expiration of the patent; provided that the patent is not enforceable for more than 14 years from the date of drug approval, which is limited to the approved indication (or any additional indications approved during the period of extension). Furthermore, only one patent per approved product can be extended and only those claims covering the approved product, a method for using it or a method for manufacturing it may be extended. However, the applicable authorities, including the FDA and the USPTO in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their drug earlier than might otherwise be the case.
Third-parties may initiate legal proceedings alleging that we are infringing, misappropriating or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a negative impact on the success of our business.
Our commercial success depends, in part, upon our ability and the ability of others with whom we may collaborate to develop, manufacture, market and sell our current and any future product candidates and use our proprietary technologies without infringing, misappropriating or otherwise violating the proprietary rights and intellectual property of third parties. The biotechnology and pharmaceutical industries are characterized by extensive and complex litigation regarding patents and other intellectual property rights. We may in the future become party to, or be
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threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our current and any future product candidates and technology, including interference proceedings, post grant review and inter partes review before the USPTO. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future, regardless of their merit. There is a risk that third parties may choose to engage in litigation with us to enforce or to otherwise assert their patent rights against us. Even if we believe such claims are without merit, a court of competent jurisdiction could hold that these third‑party patents are valid, enforceable and infringed, which could have a negative impact on our ability to commercialize our current and any future product candidates. In order to successfully challenge the validity of any such U.S. patent in federal court, we would need to overcome a presumption of validity. As this is a high burden and requires us to present clear and convincing evidence as to the invalidity of any such U.S. patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such U.S. patent. Moreover, given the vast number of patents in our field of technology, we cannot be certain that we do not infringe existing patents or that we will not infringe patents that may be granted in the future. Other companies and research institutions have filed, and may file in the future, patent applications related to AR inhibitors and their therapeutic use. Some of these patent applications have already been allowed or issued, and others may issue in the future. While we may decide to initiate proceedings to challenge the validity of these or other patents in the future, we may be unsuccessful, and courts or patent offices in the United States and abroad could uphold the validity of any such patent. Furthermore, because patent applications can take many years to issue and may be confidential for 18 months or more after filing, and because pending patent claims can be revised before issuance, there may be applications now pending which may later result in issued patents that may be infringed by the manufacture, use or sale of our product candidates. Regardless of when filed, we may fail to identify relevant third‑party patents or patent applications, or we may incorrectly conclude that a third‑party patent is invalid or not infringed by our product candidates or activities. If a patent holder believes that our product candidate infringes its patent, the patent holder may sue us even if we have received patent protection for our technology. Moreover, we may face patent infringement claims from nonpracticing entities that have no relevant drug revenue and against whom our own patent portfolio may thus have no deterrent effect. If a patent infringement suit were threatened or brought against us, we could be forced to stop or delay research, development, manufacturing or sales of the drug or product candidate that is the subject of the actual or threatened suit.
If we are found to infringe a third party’s valid and enforceable intellectual property rights, we could be required to obtain a license from such third party to continue developing, manufacturing and marketing our product candidate(s) and technology. Under any such license, we would most likely be required to pay various types of fees, milestones, royalties or other amounts. Moreover, we may not be able to obtain any required license on commercially reasonable terms or at all.
The licensing or acquisition of third‑party intellectual property rights is a competitive area, and more established companies may also pursue strategies to license or acquire third‑party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third‑party intellectual property rights on terms that would allow us to make an appropriate return on our investment or at all. If we are unable to successfully obtain rights to required third‑party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon development of the relevant program or product candidate, which could have an adverse effect on our business, financial condition, results of operations and prospects. Furthermore, even if we were able to obtain a license, it could be nonexclusive, thereby giving our competitors and other third-parties access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. We could be forced, including by court order, to cease developing, manufacturing and commercializing the infringing technology or product candidate. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. We may be required to indemnify collaborators or contractors against such claims. A finding of infringement could prevent us from manufacturing and commercializing our current or any future product candidates or force us to cease some or all of our business operations, which could harm our business. Even if we are successful in defending against such claims, litigation can be expensive and time‑consuming and would divert management’s attention from our core business. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of
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hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have an adverse effect on the price of our common stock.
Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business, financial condition, results of operations and prospects.
We may be subject to claims asserting that our employees, consultants or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property.
Certain of our employees, consultants or advisors are currently, or were previously, employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and advisors do not use the proprietary information or know‑how of others in their work for us, we may be subject to claims that these individuals or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual’s current or former employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.
In addition, we may in the future be subject to claims by our former employees or consultants asserting an ownership right in our patents or patent applications, as a result of the work they performed on our behalf. Although it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own, and we cannot be certain that our agreements with such parties will be upheld in the face of a potential challenge or that they will not be breached, for which we may not have an adequate remedy. The assignment of intellectual property rights may not be self‑executing or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property.
We may be involved in lawsuits to protect or enforce our patents, the patents of our licensors or our other intellectual property rights, which could be expensive, time‑consuming and unsuccessful.
Competitors may infringe, misappropriate or otherwise violate our patents, the patents of our licensors or our other intellectual property rights. To counter infringement or unauthorized use, we may be required to file legal claims, which can be expensive and time‑consuming and are likely to divert significant resources from our core business, including distracting our technical and management personnel from their normal responsibilities. In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our owned or licensed patents at risk of being invalidated or interpreted narrowly and could put our owned or licensed patent applications at risk of not issuing. The initiation of a claim against a third party might also cause the third-party to bring counterclaims against us, such as claims asserting that our patent rights are invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non‑enablement or lack of statutory subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant material information from the USPTO, or made a materially misleading statement, during prosecution. Third parties may also raise similar validity claims before the USPTO in post‑grant proceedings such as ex parte reexaminations, inter partes review, post‑grant review, or oppositions or similar proceedings outside the United States, in parallel with litigation or even outside the context of litigation. The outcome following legal assertions of invalidity and unenforceability is unpredictable. We cannot be certain that there is or will be no invalidating prior art, of which we and the patent examiner were unaware during prosecution. For the patents and patent applications that we have licensed, we may have limited or no right to participate in the defense of any licensed patents against challenge by a third party. If a defendant were to prevail on a
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legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of any future patent protection on our current or future product candidates. Such a loss of patent protection could harm our business.
We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States. Our business could be harmed if in litigation the prevailing party does not offer us a license, or if the license offered as a result is not on commercially reasonable terms. Any litigation or other proceedings to enforce our intellectual property rights may fail, and even if successful, may result in substantial costs and distract our management and other employees.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have an adverse effect on the price of our common stock.
We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating or from successfully challenging our intellectual property rights. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have an adverse effect on our ability to compete in the marketplace.
Changes in U.S. patent law or the patent law of other countries or jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our current and any future product candidates.
Changes in either the patent laws or interpretation of the patent laws in the United States could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. Assuming that other requirements for patentability are met, prior to March 2013, in the United States, the first to invent the claimed invention was entitled to the patent, while outside the United States, the first to file a patent application was entitled to the patent. After March 2013, under the Leahy‑Smith America Invents Act (the "America Invents Act"), the United States transitioned to a first inventor to file system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third-party was the first to invent the claimed invention. The America Invents Act also includes a number of significant changes that affect the way patent applications are prosecuted and also may affect patent litigation. These include allowing third‑party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO‑administered post‑grant proceedings, including post‑grant review, inter partes review, and derivation proceedings. However, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have an adverse effect on our business, financial condition, results of operations, and prospects.
In addition, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce patents that we own, have licensed or might obtain in the future. Similarly, changes in patent law and regulations in other countries or jurisdictions, changes in the governmental bodies that enforce them or changes in how the relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we own or have licensed or that we may obtain in the future.
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We may not be able to protect our intellectual property rights throughout the world, which could negatively impact our business.
Filing, prosecuting and defending patents covering our current and any future product candidates in all countries throughout the world would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we or our licensors have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we may obtain patent protection but where patent enforcement is not as strong as that in the United States. These products may compete with our products in jurisdictions where we do not have any issued or licensed patents, and any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our intellectual property and proprietary rights generally. Proceedings to enforce our intellectual property and proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property and proprietary rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations and prospects may be adversely affected.
Reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.
Since we rely on third parties to help us discover, develop and manufacture our current and any future product candidates, or if we collaborate with third parties for the development, manufacturing or commercialization of our current or any future product candidates, we must, at times, share trade secrets with them. We may also conduct joint research and development programs that may require us to share trade secrets under the terms of our research and development partnerships or similar agreements. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, employees, third‑party contractors and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, including our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know‑how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure could have an adverse effect on our business and results of operations.
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In addition, these agreements typically restrict the ability of our advisors, employees, third‑party contractors and consultants to publish data potentially relating to our trade secrets. Despite our efforts to protect our trade secrets, we may not be able to prevent the unauthorized disclosure or use of our technical know‑how or other trade secrets by the parties to these agreements. Moreover, we cannot guarantee that we have entered into such agreements with each party that may have or have had access to our confidential information or proprietary technology and processes. Monitoring unauthorized uses and disclosures is difficult, and we do not know whether the steps we have taken to protect our proprietary technologies will be effective. If any of the collaborators, scientific advisors, employees, contractors and consultants who are parties to these agreements breaches or violates the terms of any of these agreements, we may not have adequate remedies for any such breach or violation, and we could lose our trade secrets as a result. Moreover, if confidential information that is licensed or disclosed to us by our partners, collaborators, or others is inadvertently disclosed or subject to a breach or violation, we may be exposed to liability to the owner of that confidential information. Enforcing a claim that a third‑party illegally or unlawfully obtained and is using our trade secrets, like patent litigation, is expensive and time‑consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patent and trademark protection for our product candidates, we also rely on trade secrets, including unpatented know‑how, technology and other proprietary information, to maintain our competitive position. We seek to protect our trade secrets, in part, by entering into nondisclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees, advisors and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets. Monitoring unauthorized uses and disclosures of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual property will be effective. In addition, we may not be able to obtain adequate remedies for any such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time‑consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets.
Moreover, our competitors may independently develop knowledge, methods and know‑how equivalent to our trade secrets. Competitors could purchase our products and replicate some or all of the competitive advantages we derive from our development efforts for technologies on which we do not have patent protection. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.
We also seek to preserve the integrity and confidentiality of our data and other confidential information by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and detecting the disclosure or misappropriation of confidential information and enforcing a claim that a party illegally disclosed or misappropriated confidential information is difficult, expensive and time‑consuming, and the outcome is unpredictable. Further, we may not be able to obtain adequate remedies for any breach. In addition, our confidential information may otherwise become known or be independently discovered by competitors, in which case we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us.
Any trademarks we may obtain may be infringed or successfully challenged, resulting in harm to our business.
We expect to rely on trademarks as one means to distinguish any of our product candidates that are approved for marketing from the products of our competitors. We have selected trademarks for some of our later stage product candidates and filed applications to register those trademarks for our current or any future product candidates. For other earlier stage product candidates, we have not yet selected trademarks or begun the process of applying to register
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trademarks. Our pending trademark applications, and any future trademark applications may not be approved. Third parties may oppose our trademark applications or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing new brands. Our competitors may infringe our trademarks, and we may not have adequate resources to enforce our trademarks.
In addition, any proprietary name we propose to use with our current or any other product candidate in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. The FDA typically conducts a review of proposed product names, including an evaluation of the potential for confusion with other product names. If the FDA objects to any of our proposed proprietary product names, we may be required to expend significant additional resources in an effort to identify a suitable proprietary product name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA.
Intellectual property rights do not necessarily address all potential threats to our business.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business. The following examples are illustrative:
Risks Related to Our Business Operations, Employee Matters and Managing Growth
We are involved in a securities-related class action and derivative litigation and defending against these claims could result in substantial costs and divert management time and resources, damages and have a material adverse effect on our results of operations. These lawsuits, and any other lawsuits to which we are subject, will be costly to defend or pursue and are uncertain in their outcome.
The stock markets have from time-to-time experienced significant price and volume fluctuations that have affected the market prices for the common stock of pharmaceutical companies. These broad market fluctuations may
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cause the market price of our common stock to decline. In addition, the market price of our common stock may vary significantly based on specific events, such as receipt of complete response letters, warnings letters, such as the Complete Response Letter and Warning Letter we received from the FDA in November 2024, negative clinical results, a negative vote or decision by an FDA advisory committee, or other negative feedback from the FDA, EMA, or other regulatory agencies. This risk is especially relevant for us because biotechnology and biopharmaceutical companies often experience significant stock price volatility in connection with their investigational drug or medical device product candidate development programs and the regulatory review of their marketing applications. For example, in November 2024, we experienced a significant decline in our stock price based, in large part, on the Complete Response Letter and Warning Letter we received from the FDA.
Following receipt of the Complete Response Letter and Warning Letter, a putative class action lawsuit was filed against us and certain of our current and former officers and directors on December 17, 2024, in the United States District Court for the Southern District of New York and is captioned Alexandru v. Applied Therapeutics, Inc., et al., No. 24-cv-09715. On December 27, 2024, another purported stockholder filed a putative class action lawsuit against us and a former officer and director in the United States District Court for the Southern District of New York (Ikram v. Applied Therapeutics, Inc., et al., No. 1:24-cv-09973). On March 11, 2025 the court consolidated the actions (In re Applied Therapeutics Securities Litigation, No. 1:24-cv-9715). In addition, on January 31, 2025, certain of our current and former officers and directors were named as defendants in a shareholder derivative action filed in the United States District Court for the Southern District of New York (Hassine v. Shendelman, et al., No. 1:25-cv-00935). The complaint seeks to implement reforms to the Company’s corporate governance and internal procedures and to recover on behalf of the Company for any liability the Company might incur as a result of the individual defendants’ alleged misconduct, as well as declaratory, equitable, and monetary relief, including attorneys’ fees and other costs. The derivative action is based substantially on the same facts alleged in the consolidated action described above. Please refer to “Legal Proceedings” in this Quarterly Report on Form 10-Q for additional information about these pending legal proceedings.
The outcome of litigation is necessarily uncertain, and we cannot predict the outcome of these pending legal proceedings. An unfavorable outcome in any such proceeding could have an adverse impact on our business, financial condition, results of operations and cash resources. In addition, we may be exposed to additional litigation or government investigation even if no wrongdoing occurred and we ultimately prevail. Continuing or additional litigation, or responding to any related investigation or enforcement action, as well as a material final judgment or decree against us, would be expensive, divert management’s attention and resources, and could adversely affect our business, financial condition, results of operations and cash resources. Moreover, if our stock price is volatile, we could face additional securities class action lawsuits in the future.
We recently experienced the departure of our founder and CEO and changes to our board and our executive management. These changes may create uncertainty and, more generally, if we are unable to attract and retain qualified management, clinical and scientific personnel, our business will be harmed.
We have experienced recent changes to our senior management team and board, including the departures of our founder, President, Chief Executive Officer, Secretary and member of the board, Dr. Shoshana Shendelman, on December 19, 2024, and member of the board, Joel Marcus, on December 6, 2024. Les Funtleyder, our Chief Financial Officer, is serving as Interim Chief Executive Officer while our board conducts a search for a permanent Chief Executive Officer. On December 19, 2024, our board also appointed John H. Johnson as Executive Chairman and as Chairman of the Board. Changes in our board and senior management and uncertainty regarding pending changes may disrupt our business and investor relationships, and impair our ability to recruit and retain other needed personnel. Any such disruption or impairment could have an adverse effect on our business.
Recruiting and retaining other senior executives, qualified scientific and clinical personnel and, if we progress the development of any of our product candidates, commercialization, manufacturing and sales and marketing personnel, will be critical to our success. The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize our product candidates. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or
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motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high-quality personnel, our ability to pursue our growth strategy will be limited.
Our future performance will also depend, in part, on our ability to successfully integrate newly hired executive officers into our management team, including Mr. Johnson, and our ability to develop an effective working relationship among senior management. Our failure to integrate these individuals and create effective working relationships among them and other members of management could result in inefficiencies in the development and commercialization of our product candidates, harming future regulatory approvals, sales of our product candidates and our results of operations. Additionally, we do not currently maintain “key person” life insurance on the lives of our executives or any of our employees.
If we determine to bring in-house some functions that we are currently outsourcing and if we commercialize any of our product candidates we may experience difficulties in managing this growth, which could disrupt our operations.
As of June 30, 2025, we had 32 full‑time employees. As the clinical development of our product candidates progresses, we also expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of research, drug development, regulatory affairs and, if any of our product candidates receives marketing approval, sales, marketing and distribution. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities, and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.
Our internal computer systems, or those of our collaborators or other contractors or consultants, may fail or suffer security breaches, which could result in a significant disruption of our product development programs and our ability to operate our business effectively, and adversely affect our business and operating results.
Our internal computer systems, cloud‑based computing services and those of our current and any future collaborators and other contractors or consultants are vulnerable to damage or interruption from computer viruses, data corruption, cyber‑based attacks (including phishing attempts, denial of service attacks, and malware or ransomware incidents, attacks enhanced or facilitated by artificial intelligence), unauthorized access, natural disasters, terrorism, war, international hostilities and telecommunication and electrical failures. While we have not experienced any significant system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a disruption of our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other similar disruptions. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Furthermore, federal, state and international laws and regulations, such as the European Union’s General Data Protection Regulation, which took effect in May 2018, can expose us to enforcement actions and investigations by regulatory authorities, and potentially result in regulatory penalties and significant legal liability, if our information technology security efforts fail. In addition, our software systems include cloud‑based applications that are hosted by third‑party service providers with security and information technology systems subject to similar risks. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, our competitive position could be harmed and the further development and commercialization of our product candidates could be delayed.
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Risks of unauthorized access and cyber-attacks have increased as most of our personnel, and the personnel of many third-parties with which we do business, have adopted remote working arrangements as a result of the COVID-19 pandemic, and may increase as a result of recent hostilities between Russia and Ukraine. Related sanctions, export controls or other actions may be initiated by nations including the U.S., the EU or Russia (e.g., potential cyberattacks, disruption of energy flows, etc.), which could adversely affect our business, our CROs, CMOs and other third parties with which we conduct or in the future may conduct business. Further, state-sponsored cyberattacks could expand as part of the conflict, which would adversely affect our and our suppliers’ ability to maintain or enhance key cybersecurity and data protection measures. Improper or inadvertent employee behavior, including data privacy breaches by employees, contractors and others with permitted access to our systems, may also pose a risk that sensitive data may be exposed to unauthorized persons or to the public. If a system failure or security breach occurs and interrupts our operations or the operations at one of our third-party vendors, it could result in intellectual property and other proprietary or confidential information being lost or stolen or a material disruption of our drug development programs. For example, the loss of clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets or inappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees, access to our clinical data, or disruption of the manufacturing process, we could incur liability and the further development of our drug candidates could be delayed. We may also be vulnerable to cyber-attacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidential information and/or our financial information and adversely affect our business or reputation or result in legal or regulatory proceedings. In addition, if a ransomware attack or other cyber-attack occurs, either internally or at our third-party vendors, we could be prevented from accessing our systems or data, which may cause interruptions or delays in our business, cause us to incur remediation costs or subject us to demands to pay ransom, or adversely affect our business reputation.
Additionally, the increased prevalence and use of artificial intelligence may heighten the risk that we may be subject to cybersecurity incidents in the future. Although we don’t currently rely on or use artificial intelligence in our operations, if any of our third-party vendors who use artificial intelligence are compromised, it could have a negative impact to our business through leaks of our confidential information and/or our financial information and adversely affect our business or reputation or result in legal or regulatory proceedings.
Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading.
We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants and commercial partners. Misconduct by these parties could include intentional failures to comply with FDA regulations or the regulations applicable in other jurisdictions, provide accurate information to the FDA and other regulatory authorities, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self‑dealing and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs, and other business arrangements. Such misconduct also could involve the improper use of information obtained in the course of clinical trials or interactions with the FDA or other regulatory authorities, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from government investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could result in significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participating in government‑funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of noncompliance with these laws, contractual damages, reputational harm and the curtailment or restructuring of our operations, any of which could have a negative impact on our business, financial condition, results of operations and prospects.
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Any future acquisitions or strategic collaborations may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities and/or subject us to other risks.
From time to time, we may evaluate various acquisitions and strategic collaborations, including licensing or acquiring complementary drugs, intellectual property rights, technologies or businesses, as deemed appropriate to carry out our business plan. Any potential acquisition or strategic partnership may entail numerous risks, including:
In addition, if we engage in future acquisitions or strategic partnerships, we may issue dilutive securities, assume or incur debt obligations, incur large one‑time expenses, and acquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities, and this inability could impair our ability to grow or obtain access to technology or drugs that may be important to the development of our business.
Risks Related to Ownership of Our Common Stock
The market price of our common stock is volatile and has fluctuated substantially, which could result in substantial losses for purchasers of our common stock.
The stock market in general and the market for biopharmaceutical and pharmaceutical companies in particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above the price at which you purchased it. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Quarterly Report on Form 10-Q, the market price for our common stock has been, and is likely to continue to be influenced by the following:
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These and other market and industry factors have caused the market price and demand for our common stock to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from selling their shares at or above the price paid for the shares and may otherwise negatively affect the liquidity of our common stock. Furthermore, we believe our stock has been, and may in the future be, adversely affected as a result of actions by third-parties. Short sellers and others, some of whom post anonymously on social media, may be positioned to profit if our stock declines and their activities can negatively affect our stock price.
Some companies that have experienced volatility in the trading price of their shares have been the subject of lawsuits and/or securities class action litigation. Any lawsuit to which we are a party, with or without merit, may result in an unfavorable judgment. We also may decide to settle lawsuits on unfavorable terms. Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation or adverse changes to our business practices. Defending against litigation is costly and time-consuming, and could divert our management’s attention and our resources. Furthermore, during the course of litigation, there could be negative public announcements of the results of hearings, motions or other interim proceedings or developments, which could have a negative effect on the market price of our common stock.
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If we fail to regain compliance with the continued listing requirements of Nasdaq, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.
On February 7, 2025, we received a deficiency letter (the “Bid Price Letter”) from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”), notifying us that, for the last 30 consecutive business days, the bid price for our common stock had closed below the minimum $1.00 per share requirement (the “Bid Price Requirement”) for continued inclusion on the Nasdaq Global Market, referred to as the minimum bid price rule. In accordance with Nasdaq Listing Rules, we were given an initial period of 180 calendar days, or until August 6, 2025, to regain compliance with the minimum bid price rule. The Bid Price Letter also noted if we do not regain compliance by August 6, 2025, we may be eligible for an additional 180 calendar day remediation period if we transfer the listing of our common stock to the Nasdaq Capital Market. To qualify, we would be required to meet the continued listing requirement for market value of publicly held shares and all initial listing standards for the Nasdaq Capital Market, with the exception of the Bid Price Requirement, and would need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. If we met these requirements, the Bid Price Letter stated that Nasdaq would inform us that we have been granted an additional 180 calendar days.
We have submitted an application to transfer the listing of our common stock from the Nasdaq Global Market to the Nasdaq Capital Market. We believe that we have met the continued listing requirement for market value of publicly held shares and all initial listing standards for the Nasdaq Capital Market, with the exception of the Bid Price Requirement, including the minimum $5 million stockholders’ equity requirement. However, Nasdaq has not yet granted our application or determined whether we qualify for the additional 180 calendar day remediation period. Until Nasdaq has determined that we are compliant with the continued listing requirement for market value of publicly held shares and all initial listing standards for the Nasdaq Capital Market, there can be no assurance that our common stock will be transferred to the Nasdaq Capital Market or that our common stock will not be delisted from Nasdaq
There are many factors that may adversely affect our compliance to the minimum bid price and other applicable listing standards for Nasdaq, including those described throughout this section titled “Risk Factors.” Many of these factors are outside of our control. As a result, we may not be able to sustain compliance with the applicable listing standards for Nasdaq in the long term. Any potential delisting of our common stock from Nasdaq would likely result in decreased liquidity and increased volatility for our common stock and would adversely affect our ability to raise additional capital or to enter into strategic transactions. Any potential delisting of our common stock from Nasdaq would also make it more difficult for our stockholders to sell our common stock in the public market.
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
You should not rely on an investment in our common stock to provide dividend income. We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. Investors seeking cash dividends should not purchase our common stock.
Future sales of common stock by holders of our common stock, or the perception that such sales may occur, could depress the market price of our common stock.
We expect that we will need significant additional capital in the future to continue our planned operations, including conducting clinical trials, commercialization efforts if we are able to obtain marketing approval of any of our current or future product candidates, research and development activities, and costs associated with operating a public company. To raise capital, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time, subject to certain restrictions described below. These sales, or the perception in the market that holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. As of June 30, 2025, we had outstanding 141,938,335 shares of common stock. A substantial number of such shares are currently restricted as a result of securities laws or lock‑up agreements but will be able to be sold in the future.
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We further have registered all shares of common stock that we may issue in the future or have issued to date under our equity compensation plans. These shares can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and certain lock‑up agreements. Sales of a large number of the shares issued under these plans in the public market could have an adverse effect on the market price of our common stock.
General Risk Factors
If research analysts do not publish research or reports, or publish unfavorable research or reports, about us, our business or our market, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or financial analysts publish about us or our business. Equity research analysts may discontinue research coverage of our common stock, and such lack of research coverage may adversely affect the market price of our common stock. We do not have any control over the analysts, or the content and opinions included in their reports. The price of our shares could decline if one or more equity research analysts downgrade our shares or issue other unfavorable commentary or research about us. If one or more equity research analysts cease coverage of us or fail to publish reports on us regularly, demand for our shares could decrease, which in turn could cause the trading price or trading volume of our common stock to decline.
We have broad discretion in the use of our cash and cash equivalents and may use them ineffectively, in ways with which you do not agree or in ways that do not increase the value of your investment.
Our management has broad discretion in the application of our cash and cash equivalents and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in additional operating losses that could have a negative impact on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest our cash and cash equivalents in a manner that does not produce income or that loses value.
We no longer qualify as an “emerging growth company,” and as a result, we have to comply with increased disclosure and compliance requirements.
While we still qualify as a “smaller reporting company,” as defined in Regulation S-K of the Securities Act of 1933, as amended (the "Securities Act") we no longer qualify as an emerging growth company (“EGC”) as defined in the Jumpstart Our Business Startups Act because in 2024, we reached the five-year anniversary of the first sale of our common stock pursuant to an effective registration statement under the Securities Act. As such, we are no longer exempt from certain disclosure and compliance requirements that apply to other public companies but did not previously apply to us due to our status as an EGC. These requirements include, but are not limited to:
We anticipate increased expenses, including exchange listing and SEC requirements, director and officer insurance premiums, legal, audit and tax fees, regulatory compliance programs, and investor relations costs associated with being a public company and ceasing to be an EGC.
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We have incurred increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.
As a public company, and particularly now that we are no longer an EGC, we incur and will continue to incur significant legal, accounting and other expenses. In addition, the Sarbanes‑Oxley Act of 2002, or the Sarbanes‑Oxley Act, and rules subsequently implemented by the SEC and The Nasdaq Stock Market LLC have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to comply with these requirements. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time‑consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance.
Pursuant to Section 404, we will be required to furnish a report by our management on our internal control over financial reporting. However, while we remain an EGC, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that neither we nor our independent registered public accounting firm will be able to conclude within the prescribed timeframe that our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.
The U.S. Congress, the Trump administration, or any new administration may make substantial changes to fiscal, tax, and other federal policies that may adversely affect our business.
Since the start of the Trump administration in 2025, U.S. policy changes have been implemented at a rapid pace and additional changes are likely. Changes to U.S. policy implemented by the U.S. Congress, the Trump administration or any new administration have impacted and may in the future impact, among other things, the U.S. and global economy, international trade relations, unemployment, immigration, healthcare, taxation, the U.S. regulatory environment, inflation and other areas. For example, the One Big Beautiful Bill Act (“OBBBA”) was signed into law on July 4, 2025 and made significant changes to U.S. federal tax law. The OBBBA provides that for taxable years beginning after December 31, 2024, expenses that are incurred for research and development performed in the U.S. may, at the taxpayer’s election, be immediately deducted or capitalized and amortized. In addition, the OBBBA provides that for taxable years beginning after December 31, 2021 and before January 1, 2025, certain eligible taxpayers generally may elect to retroactively deduct expenses for research and development performed in the U.S. in such taxable years by filing amended tax returns for such taxable years, and all other taxpayers that are not eligible to make such an election and that amortized expenses for research and development performed in the U.S. in such taxable years generally may elect to accelerate and deduct the remaining unamortized amounts of such research and development expenses (i) in the first taxable year beginning after December 31, 2024, or (ii) ratably over the two-taxable year period beginning with the first taxable year beginning after December 31, 2024.
Although we cannot predict the impact, if any, of these changes to our business, they could adversely affect our business. Until we know what policy changes are made, whether those policy changes are challenged and subsequently upheld by the court system and how those changes impact our business and the business of our competitors over the long term, we will not know if, overall, we will benefit from them or be negatively affected by them.
Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might
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otherwise receive a premium for your shares. These provisions also could limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law ("DGCL"), which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. These provisions could discourage potential acquisition proposals and could delay or prevent a change in control transaction. They could also have the effect of discouraging others from making tender offers for our common stock, including transactions that may be in your best interests. These provisions may also prevent changes in our management or limit the price that investors are willing to pay for our stock.
Our governing documents designate certain courts as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation provides that, with respect to any state actions or proceedings under Delaware statutory or common law, the Court of Chancery of the State of Delaware is the exclusive forum for:
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In addition, our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States are, to the fullest extent permitted by law, the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
These exclusive‑forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. If a court were to find an exclusive‑forum provision in our amended and restated certificate of incorporation or our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our business.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
During the six months ended June 30, 2025, no officer or director of the Company (as defined in Rule 16a-1(f))
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Item 6. Exhibits.
Exhibit |
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Description |
10.1+ |
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Separation Agreement, by and between the Company and Riccardo Perfetti, dated as of June 13, 2025 (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 17, 2025). |
10.2+ |
|
Amended and Restated Offer Letter, by and between the Company and Evan Bailey, dated as of June 13, 2025 (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed with the SEC on Juen 17, 2025). |
31.1 |
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Rule 13a‑14(a)/15d‑14(a) Certification under the Exchange Act by John Johnson, Executive Chairman (Principal Executive Officer). |
31.2 |
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Rule 13a-14(a)/15d-14(a) Certification under the Exchange Act by Les Funtleyder, Interim Chief Executive Officer and Chief Financial Officer (Principal Financial Officer). |
32.1* |
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Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Section 1350 Certifications. |
32.2* |
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Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Section 1350 Certifications. |
101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document With Embedded Linkbase Documents. |
104 |
|
Cover Page formatted as Inline XBRL and contained in Exhibit 101. |
* Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing under the Securities Act, or the Exchange Act (whether made before or after the date of the Form 10‑Q), irrespective of any general incorporation language contained in such filing.
+ Indicates a management contract or compensatory plan
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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APPLIED THERAPEUTICS, INC. |
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Date: August 13, 2025 |
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By: |
/s/ John H. Johnson |
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John H. Johnson |
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Executive Chairman (Principal Executive Officer) |
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Date: August 13, 2025 |
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By: |
/s/ Les Funtleyder |
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Les Funtleyder |
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Interim Chief Executive Officer and Chief Financial Officer |
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|
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(Principal Financial Officer) |
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Source:
FAQ
What was Applied Therapeutics (APLT) cash position at June 30, 2025?
How large was APLT's net loss in the first half of 2025?
Did Applied Therapeutics receive any regulatory setbacks in 2024鈥�2025?
What license or partnership revenue has APLT recognized with Advanz?
Does the company disclose a going-concern issue?
Are there any significant legal proceedings disclosed?
