Applied Therapeutics Begins U.S. IPO Effort

About: Applied Therapeutics (APLT), Includes: ARRY, BSX, GSK, JNJ, MRK, NVS, PFE, PHAS, VCEL
by: Donovan Jones

Applied Therapeutics has filed to raise $86 million in a U.S. IPO.

The firm is advancing a pipeline of treatments for cardiomyopathy and other conditions affected by aldose reductase.

APLT seeks to enter Phase 2/3 trials for its lead candidate in 2019.

Quick Take

Applied Therapeutics (APLT) has filed to raise gross proceeds of $86.25 million from a U.S. IPO, according to an S-1 registration statement.

The firm is developing targeted therapeutics for the treatment of rare diseases with unmet clinical needs.

APLT seeks to initiate Phase 2/3 trials for its lead candidate with the IPO proceeds and there is one life science-focused investor (5% or greater) in the company.

Company And Technology

New York-based Applied Therapeutics was founded in 2016 to develop new therapeutics for rare diseases that overcome the safety and tolerability limits of previously discovered drugs.

Management is headed by Founder, President, CEO Shoshana Shendelman, who previously served in various positions at Clearpoint Strategy Group.

Aldose reductase [AR] is an enzyme whose activity produces excess sorbitol, causing osmotic dysregulation within cells and tissues, and is implicated in multiple diseases, including those caused by mitochondrial dysfunction and cell death, neuronal degeneration in peripheral nerves, collagen crosslinking and fibrosis in cardiac tissue, and damage to blood vessels in the lens of the eye.

AR is the first enzyme and a rate-limiting step in the polyol pathway - an alternative sugar metabolism. Its activity is elevated in patients with hyperglycemia or ischemic stress, two conditions commonly associated with diabetes.

Applied Therapeutics is developing AT-001, an aldose reductase inhibitor [ARI] for the treatment of diabetic cardiomyopathy, a heart tissue fibrosis for which there are no currently approved treatments, and diabetic peripheral neuropathy.

The company’s second drug candidate in development is AT-007, an ARI that penetrates the central nervous system for the treatment of galactosemia, a rare pediatric metabolic disease that affects how the body processes a simple sugar called galactose.

APLT is also developing AT-104, an phosphatidylinositol 3-kinase (PI3K) inhibitor for the treatment of orphan hematological oncology indications, with an initial focus on peripheral T-cell lymphoma, cutaneous T-cell lymphoma, and T-cell acute lymphoblastic leukemia.

Below is the current status of the company’s drug development pipeline:

Source: Company registration statement

The company has raised approximately $35 million in private investment to-date from investors including Alexandria Venture, E Squared, and others. CEO Shendelman is the largest shareholder, with 37.6% of company stock pre-IPO.

Market And Competition

According to a 2018 market research report by Markets and Markets, the global cardiomyopathy market is projected to grow between 2018 and 2023 due to advancements in understanding and management of the disease, as well as a rise in the incidence of congestive heart failure, coronary heart disease, heart attack, and diabetes.

The Asia-Pacific region will grow at the fastest rate due to the growth of medical tourism in emerging countries, mainly India and China.

Management believes that currently approved or tested ARIs cannot manage the diseases effectively due to the therapeutics being non-selective and presenting a range of major off-target side effects that significantly limit their use.

Furthermore, the registration statement indicates the firm sees two potential competitors in Novartis (NVS) and Lucentis.

The table below presents management's view of its competitive landscape: Source: S-1 registration statement

Financial Status

APLT’s recent financial results are typical of a development stage biopharma in that they feature no revenue and significant and growing R&D and G&A costs associated with advancing the firm’s pipeline of treatment candidates.

Below are the company’s financial results for the past two years (Audited PCAOB):

Source: Company registration statement

As of December 31, 2018, the company had $18.7 million in cash and $4.4 million in total liabilities.

IPO Details

APLT intends to raise $86.25 million in gross proceeds from an IPO of its common stock, not including customary underwriter options.

No entities or existing shareholders have indicated an interest to purchase shares of IPO although I would expect to see investor support for the transaction to be successful in the current environment.

Per the firm’s latest filing, it plans to use the net proceeds from the IPO as follows:

to fund our pivotal Phase 2/3 clinical trial for AT-001 for the treatment of diabetic cardiomyopathy;

to advance AT-007 for the treatment of galactosemia in adults through our planned Phase 1 clinical trial;

to advance AT-003 for the treatment of diabetic retinopathy into our planned Phase 1 clinical trial; and

the remainder to fund other research and development activities, working capital and other general corporate purposes.

Management’s presentation of the company roadshow isn’t available.

Listed underwriters of the IPO are Citigroup, Cowen, UBS Investment Bank, and Baird.

Expected IPO Pricing Date: To be announced.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.