How One FDA Letter Caused $750 Million in Applied Therapeutics’ Market Cap to Disappear

If you thought your Black Friday was rough because you had to wait in line at Old Navy to buy a pair of jeans like me… spare a thought for Applied Therapeutics. The biopharma saw its shares nosedive a stomach-churning 77% on Friday morning after the FDA essentially said, “Hard pass,” to its experimental drug, govorestat (who creates these words?).

Govorestat was hyped as the answer to Classic Galactosemia, a rare condition where a simple sugar, galactose, turns into a biochemical grenade for about 3,300 Americans and 4,400 Europeans. The drug showed promise, reducing toxic galactitol levels and improving cognitive and motor skills in kids during clinical trials. But the FDA wasn’t feeling it. 

Applied Therapeutics’ stock sunk from glory to penny-stock territory in just a few hours. Shares closed at $2.03, wiping out nearly $750 million in market value. And if you’re wondering, yes, the markets were only open for a half-day, proving that bad news doesn’t need a full 24 hours to wreck your portfolio.

This is particularly brutal considering APLT was having a Cinderella moment earlier this year, with shares up 135% in anticipation of an FDA nod. But alas, the glass slipper didn’t fit.

So, what went wrong? The FDA sent Applied Therapeutics a Complete Response Letter (CRL), which is regulatory jargon for, “We reviewed your homework, and it’s not good enough to pass.” The CRL flagged gaps in the clinical application that prevented approval of govorestat for commercial use.

What’s interesting is that Govorestat has shown promising results in clinical trials. In the Phase 3 ACTION-Galactosemia Kids study, the drug reduced toxic galactitol levels and improved cognitive/motor skills. Basically, giving kids with Galactosemia a fighting chance. But apparently, that wasn’t enough to appease the FDA gods.

CEO Shoshana Shendelman, likely drafting this statement through gritted teeth, expressed her disappointment: “We are disappointed by the FDA’s decision. Our strong commitment to the Galactosemia community is rooted in our belief that govorestat has the potential to change lives.” The company isn’t ready to throw in the towel just yet. They plan to huddle with the FDA to figure out how to fix the deficiencies or potentially appeal the decision.

The FDA’s rejection might feel dramatic, but in the biotech world, it’s par for the course. After all, less than 10% of experimental drugs ever make it to market. Sure, APLT’s chances of approval might look slim right now, but as the great philosopher Michael Scott (borrowing from Wayne Gretzky) once said, “You miss 100% of the shots you don’t take.”

For now, the company is pivoting to its next big project: using govorestat to tackle another rare condition, SORD Deficiency (inherited neuropathy). The timeline for that application is 2025. Mark your calendars, but maybe pencil it in lightly.

With all of that said… analysts are sticking by Applied Therapeutics with a consensus “Strong Buy” rating. Their average price target of $9.75 implies a whopping 355% upside from its current bargain-bin price. But let’s not kid ourselves. Betting on APLT now is like jumping on a trampoline over a shark tank. Sure, there’s upside, but one mistimed bounce and… well, you get the picture.

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Stock.News has positions in Applied Therapeutics mentioned in article.