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Applied Therapeutics Shares Soar Amid Positive FDA Update: What Investors Need to Know

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Written by Timothy Sykes Reviewed by Jack Kellogg Fact-checked by Ellis Hobbs

An exciting development for Applied Therapeutics Inc. has boosted its market performance on Thursday, with the company’s stock trading up by 11.21 percent. This significant uptick is driven by promising news, including a positive clinical trial outcome for their lead drug candidate. Investors are responding optimistically, expecting substantial advancements in the company’s treatment pipeline.

Key Developments in the Recent Share Movements

  • Shares surged 69% following an update on the New Drug Application (NDA) review by the FDA for govorestat, aimed at treating Classic Galactosemia.
  • The significant rise of 65% in stock value came after the FDA announced the elimination of an advisory committee meeting for govorestat, with priority review continuing.
  • Applied Therapeutics experienced a remarkable spike of 66% after it was reported that no advisory committee meeting would be necessary, with a final decision expected by Nov 28.

Candlestick Chart

Live Update at 10:51:44 EST: On Thursday, September 19, 2024 Applied Therapeutics Inc. stock [NASDAQ: APLT] is trending up by 11.21%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

Quick Overview of Applied Therapeutics Inc.’s Financial Performance

When examining the recent earnings of Applied Therapeutics, it’s evident there’s been a whirlwind of activity. The stock’s recent surge isn’t just a fluke; there’s tangible support from encouraging developments in its financial statements.

For the quarter ending June 30, 2024, revenue was a modest $9.99M. The low revenue did not initially inspire confidence, admittingly. The company reported a net income of $2.9M, which, when viewed in the context of their operational challenges, portrays resilience. Amortization was recorded at $304K, while stock-based compensation stood at $1.89M. Despite these, the company experienced a cash decrease of approximately $24.29M over the quarter.

In terms of key ratios, we see a financial strength that’s commendable yet indicates room for improvement. The current ratio at 2.3 and a quick ratio of 2.2 denote that Applied Therapeutics can meet its short-term obligations with some ease. However, significant challenges are evident in profitability ratios, with a return on assets (ROA) at a shocking -95.17% and return on equity (ROE) at -473.21%. Both figures suggest that returns are deeply negative, reflecting the company’s heavy investment period.

The technology-heavy industry APLT operates in often demands high upfront costs with long-payout timelines. Therefore, while these ratios appear stark, they’re not uncommon. The enterprise value, standing at approximately $412.05M, juxtaposes the price-to-sales ratio of 90.22, indicating high investor expectations and willingness to back the company during its growth phase.

Candle Chart and Price Movement Analysis

Reviewing the multi-day price movements, it’s clear the stock experienced volatility leading up to September 19, 2024. Before the surge:

  • On September 17, the stock closed at $4.65, demonstrating uncertainty.
  • By September 18, it spiked to a close of $7.85, signifying market reaction to the favorable FDA update.
  • Climbing further, the price reached $8.73 by September 19. The bullish momentum is evident as investors reacted enthusiastically to the news.

The intraday candle chart provides additional insights:

  • An upward trend consistent from early morning hours on September 19, with multiple peaks and possible consolidations in the $8.3 to $8.73 range.
  • High volume spikes during key announcements, showcasing heightened investor activity and sentiment boost.

Revenue Scenarios and Key Ratios

According to the latest financial data, Applied Therapeutics Inc. is a classic example of a biotech firm managing its early-stage financial struggle while keeping an eye on a promising horizon. The company’s operating revenue was reported at $144K for Q2 2024, against total expenses of $20.58M—illustrative of the heavy spending in R&D and other operational costs.

The pretax profit margin is recorded at -4,950%, emphasizing the extent of the current operating loss. With gross profit just scratching $144K against stout spending on research ($10M) and general administration ($10.58M), it’s clear Applied Therapeutics is bankrolling its future pipeline.

Their working capital recognized at $72.21M highlights their preparedness to cover upcoming costs while maneuvering through pivotal clinical trials. The balance sheet reveals $122.2M in cash and cash equivalents, underscoring liquidity. Payables, though, stand at $2.68M—manageable but notable.

Elaboration of FDA’s Impact on Stock Price

The FDA’s decisions profoundly influenced APLT’s stock trajectory. Let’s break down why the latest updates matter significantly.

FDA Eliminates the Need for Advisory Meeting

On September 18, the FDA disclosed that Applied Therapeutics’ NDA for govorestat, which targets Classic Galactosemia, would not require an advisory committee meeting. This announcement is monumental for several reasons:

  • Acceleration in Approval: The advisory meeting could have prolonged the review process, introducing more uncertainty and potential delays.
  • Regulatory Confidence: This move indicates robust data from APLT, with the FDA confident enough to forgo additional advisory discussions.
  • First of Its Kind: Govorestat, if approved, would represent a groundbreaking treatment for a rare and serious genetic disorder.

More Breaking News

Market Reaction and Stock Value Uptick

Stocks responded swiftly. Here’s why:

  • Investor Optimism: The elimination signifies a smoother regulatory pathway, removing a significant overhang from investor sentiment.
  • Easing of Concerns: For once, traders were relieved from the volatility typical of biotech stocks pending crucial FDA decisions. The market saw this as a resounding vote of confidence for APLT.

Potential Revenue and Market Implications

Govorestat’s approval could translate into substantial revenue. Galactosemia affects approximately 1 in 60,000, notably driving annual treatments worth millions. Assuming successful commercialization, Applied Therapeutics could see significant market capture and recurring revenue.

Beyond the News: A Strategic Push

Courageous moves often have bold backers. Applied Therapeutics’ announcement was bolstered by Citi raising its price target to $8 while keeping a Buy rating. Such endorsements indicate institutional backing, reflecting profound confidence in APLT’s strategic trajectory.

Can These Positive Strides Hold Up?

It is crucial to evaluate long-term performance metrics and sustainability:

  • Profitability: Achievements in revenue must counteract current steep expenses. Reaching sustainable profitability will hinge on successful market penetration and cost management.
  • Pipeline Potential: Govorestat’s approval could pave the way for broader applications, adaptions, and expanded indications in metabolic disorders.
  • Operational Efficiency: The operational efficiency showcased has crucial long-term ramifications. Meeting priority review timelines and innovative cost management will be keenly observed.

Conclusion

Applied Therapeutics’ recent developments paint an inspiring yet cautionary tale of biotech ventures. The stock’s surge of nearly 69% is the result of tangible regulatory optimism. Investors see potential in the unique treatment for Classic Galactosemia, drawing immense sentiment. Robust financials, including significant cash position and manageable payables, offer encouraging signs despite current profitability challenges. As the November 28 date with the FDA looms closer, all eyes will be on whether govorestat clinches approval, potentially transforming APLT into a groundbreaking biotech success story.

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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”