Short reports are nothing new, but the aggressive “I’m coming after you” PR from Applied Therapeutics certainly is.
A week ago, a short report attacking the New York biotech floated onto Twitter and through a blog from Biotech Research Partners. It wasn’t as well covered as some of these reports but apparently still did a number on Applied Therapeutics, which saw its shares drop around 6% in the buildup to the July Fourth weekend.
The report questions the biotech’s trial data and “integrity” issues from one of its latest studies, questioning whether it can really gain approval and alleging the company is cutting corners.
Applied has been working on a series of drugs that target aldose reductase, an enzyme that converts glucose into sorbitol, a sugar alcohol involved in multiple diseases including complications of diabetes.
Previous efforts to block aldose reductase have had limited success as they have not been selective or specific enough, but in its SEC-1 filing for its IPO last year, the company said it designed its drugs to overcome these challenges.
Its lead program, AT-001, in diabetic cardiomyopathy has been in a mid- to late-stage study (and is also now being used in critical COVID-19 patients), with its second drug, AT-007, in galactosemia—a rare genetic disorder that affects how the body processes galactose, a simple sugar—in phase 1.
Galactose is produced in the body at low levels and, along with glucose, makes up lactose, found in milk and dairy products. There are a few types of galactosemia, which differ in severity and symptoms. But Type 1, the most severe kind, can be fatal if not caught early in life.
It is also working on a phase 1 study testing AT-003 in patients with diabetic retinopathy.
In addition to its aldose reductase programs, Applied Therapeutics is also working on a PI3K (phosphatidylinositol 3-kinase) inhibitor for blood cancers. It is developing the drug, AT-104, for peripheral T-cell lymphoma, cutaneous T-cell lymphoma and T-cell acute lymphoblastic leukemia.
The short attack, pulling no punches, says: “We believe that Applied Therapeutics’ stock is wildly overvalued and that its prospects for commercial success of any kind are dim.” It takes specific aim at its AT-007 data for galactosemia.
“In our opinion, the company is doing more than just leveraging a permissive FDA—we think they are cutting corners.” It says one of its main concerns is that the current trial size is “substantially smaller than originally planned” and that a patient was enrolled twice in the same trial.
Seeing the report, and the fallout for its shares, Applied hit back, saying it had “uncovered fraudulent attempts to manipulate the Applied Therapeutics stock.”
It went on: “On July 1, 2020, a fraudulent 'short report,' was posted on an online platform from an untraceable and anonymous source. Immediately following, individuals believed to have taken short positions in Applied Therapeutics’ stock shared the report on social media. The report includes fabricated graphs and fraudulent data which it falsely attributes to Applied Therapeutics for the apparent purpose of manipulating the company’s stock price.
“Applied Therapeutics will work with law enforcement and regulators to ensure that this criminal activity is prosecuted. The company has hired Reed Brodsky of Gibson, Dunn & Crutcher, a former federal prosecutor at the United States Attorney’s Office for the Southern District of New York, to assist in this matter.”
The biotech’s stock was down 5% premarket this morning.