Applied Therapeutics Faces Class-Action Lawsuit Following FDA Rejection
A federal securities class-action lawsuit has been filed against Applied Therapeutics (APLT), alleging the company misled investors regarding its clinical trials and the efficacy of its lead drug candidate, govorestat. The lawsuit, representing investors who purchased APLT securities between January 3, 2024, and December 2, 2024, claims the company concealed critical information about the Phase 3 INSPIRE trial, including issues with electronic data capture and dosing errors. These omissions, the lawsuit argues, led to an artificially inflated stock price.
FDA Actions Trigger Stock Plummet
The catalyst for the lawsuit was a Complete Response Letter (CRL) from the Food and Drug Administration (FDA) on November 27, 2024, rejecting the New Drug Application for govorestat. This was followed by an FDA warning letter on December 2, 2024, detailing further concerns about the clinical trial, including the previously undisclosed data capture and dosing errors. Following these disclosures, APLT’s stock price experienced a significant drop.
Allegations of Misleading Information
The lawsuit alleges that Applied Therapeutics actively concealed these problems from investors, creating a false impression of the trial’s success. It is alleged that the company touted positive results while withholding information about significant flaws that ultimately led to the FDA’s rejection of the drug. This is a serious accusation that could have significant financial consequences for Applied Therapeutics.
Executive Changes Amidst Crisis
In response to the unfolding crisis, Applied Therapeutics announced significant changes in its leadership. Shoshana Shendelman stepped down as Chair and CEO, with John Johnson taking over as executive chairman and Les Funtleyder becoming the interim CEO. These leadership changes signal the company’s attempts to address the fallout from the FDA’s actions and the ensuing lawsuit.
Analyst Downgrade Reflects Concerns
The negative sentiment surrounding Applied Therapeutics is reflected in a recent analyst downgrade. RBC Capital maintained a Sector Perform rating but lowered the price target from $4 to $1.5, indicating a significant reduction in the projected stock value. This further underscores the market’s lack of confidence in the company’s near-term prospects.
Impact on Investors and Future Implications
The lawsuit seeks to recover damages for investors who suffered financial losses due to the alleged misleading information. The outcome of the lawsuit will significantly impact Applied Therapeutics’ financial stability and its ability to move forward with govorestat. The case also highlights the crucial importance of transparent and accurate reporting from pharmaceutical companies during clinical trials. Future regulatory scrutiny and investor confidence in Applied Therapeutics remains uncertain.
Stock Price Performance
On the day of these leadership changes and the publication of this news, APLT stock closed down 13.7% at $0.87, reflecting the considerable market concern.
