12:15 PM EST, 11/29/2024 (MT Newswires) -- Applied Therapeutics' ( APLT ) lead drug candidate, govorestat, likely faces "significant" uncertainty in potentially treating galactosemia after the US Food and Drug Administration rejected the biopharmaceutical company's drug application, RBC Capital Markets said Friday.

Late Wednesday, the clinical-stage company said the FDA is unable to approve govorestat's new drug application for the treatment of classic galactosemia in its current form amid "deficiencies" in the application. Galactosemia is a rare genetic metabolic disease that leads to an inability to metabolize the simple sugar galactose.

The company's shares plunged 75% in Friday afternoon trade. The stock has lost 37% in value so far this year.

"We are disappointed by the FDA's decision," Applied Therapeutics ( APLT ) Chief Executive Shoshana Shendelman said in a Wednesday statement. "Govorestat has the potential to change the lives of patients with galactosemia, which we believe is evidenced by the breadth of efficacy and safety data demonstrating its ability to stop the decline on progressive clinical outcomes, including cognition and behavior."

The company said it was reviewing the FDA's feedback. It planned to request a meeting to discuss a potential resubmission of the new drug application or a possible appeal.

Given factors such as govorestat's data suggesting overall clinical benefit and the unmet need of children with galactosemia, "we had thought the drug was more likely than not to be approved," RBC Head of Global Healthcare Research Brian Abrahams said in a Friday note to clients. "That said, the primary endpoint miss had always posed a risk (and) there were a number of complexities in the data."

The company will likely need another clinical trial with "a more definitive outcome," especially as it already expressed openness to the FDA regarding a more limited label or accelerated approval for govorestat based on existing data, Abrahams said.

RBC expects more clarity on the situation following a near-term meeting between Applied Therapeutics ( APLT ) and the FDA. However, this could "push the clock back" by more than three years and lower the program's success probability to 20% from the previously projected 70%, according to the note.

The company said Wednesday it is also developing govorestat for the treatment of sorbitol dehydrogenase deficiency, a rare and progressive neuromuscular disease. It expects to submit a new drug application early in the first quarter.

"Govorestat still has a potential path forward in (sorbitol dehydrogenase deficiency), where FDA could be more aligned, though this will take some time to play out," Abrahams wrote.

The brokerage downgraded its rating on the Applied Therapeutics ( APLT ) stock to sector perform, speculative risk from outperform and slashed its price target to $4 from $12.

Price: 2.17, Change: -6.41, Percent Change: -74.74