On Friday, RBC Capital Markets adjusted its stance on Applied Therapeutics (NASDAQ:APLT), downgrading the stock from Outperform to Sector Perform and slashing the price target to $4.00 from the previous $12.00. The stock, which has seen a remarkable 324% return over the past year, recently experienced a sharp 11% decline in the past week.
According to InvestingPro data, three analysts have revised their earnings downward for the upcoming period. The decision came after the company received a Complete Response Letter (CRL) for its drug govorestat, aimed at treating galactosemia, which led to heightened uncertainties regarding the drug's future prospects for this indication.
The analyst expressed disappointment with the CRL for govorestat, pointing out the challenges it poses for the drug's path forward in treating galactosemia. Despite this setback, the analyst acknowledged that there is still potential value in the company's SORD deficiency program.
With a market capitalization of nearly $1 billion and a favorable cash-to-debt position, the company maintains financial flexibility to pursue its development programs. This program is seen as a possibly larger indication and is expected to be reviewed by what is perceived as a potentially more flexible division of the FDA, with a New Drug Application (NDA) submission anticipated in the first quarter of 2025.
However, the analyst also noted that there are uncertainties surrounding Applied Therapeutics' ability to compile a compelling data package for SORD deficiency. The process of proving the drug's efficacy and safety for this condition is expected to take time, which adds to the overall risk profile of the company.
For deeper insights into APLT's financial health and growth prospects, InvestingPro subscribers can access comprehensive analysis, including 12 additional ProTips and detailed valuation metrics.
In light of the recent developments and the mixed potential outcomes, RBC Capital Markets anticipates that Applied Therapeutics' shares will trade close to their current price in the near term. The firm's revised outlook reflects a more cautious view of the stock, balancing the opportunities with the risks that are now more evenly matched.
Based on InvestingPro's Fair Value analysis, the stock currently appears to be fairly valued, with analyst targets ranging from $12 to $15 per share.
In other recent news, Applied Therapeutics received a Complete Response Letter from the U.S.
Food and Drug Administration, declining approval for the company's Classic Galactosemia drug, govorestat, due to clinical application deficiencies. Despite this setback, the drug has shown promise in clinical trials, demonstrating improvements in cognitive and behavioral outcomes in pediatric patients. The company remains committed to the Galactosemia community and plans to discuss potential resubmission or appeal options with the FDA.
In parallel, Applied Therapeutics is developing govorestat for the treatment of Sorbitol Dehydrogenase Deficiency, with a New Drug Application submission expected in early 2025. The drug has received various designations from regulatory agencies for multiple rare diseases.
On the financial front, Applied Digital Corporation reported a fiscal first quarter revenue of $60.7 million, surpassing analyst expectations and marking a 67% increase year-over-year. The company's adjusted net loss was $21.6 million or $0.15 per share, a figure better than the anticipated loss of $0.27 per share. Adjusted EBITDA stood at $20.0 million, a significant increase from the previous year.
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