Applied Therapeutics Inc. [APLT] Filings

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Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

10-Q 1 aplt-20230630x10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 001-38898

Applied Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware

81-3405262

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

545 Fifth Avenue, Suite 1400

New York, New York 10017

(212) 220-9226

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.0001	APLT	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 09, 2023, the registrant had 63,124,227 shares of common stock, $0.0001 par value per share, outstanding.

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		Page
	Special Note Regarding Forward-Looking Statements	2
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	4
	Condensed Balance Sheets	4
	Condensed Statements of Operations	5
	Condensed Statements of Comprehensive Loss	6
	Condensed Statements of Stockholders’ Equity	7
	Condensed Statements of Cash Flows	8
	Notes to Condensed Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	44
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	85
Item 3.	Defaults Upon Senior Securities	85
Item 4.	Mine Safety Disclosures	85
Item 5.	Other Information	85
Item 6.	Exhibits	86
	Signatures	87

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of the federal securities laws made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future financial condition, future operations, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “opportunity,” “plan,” “predict,” “project”, “positioned,” “potential,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” in this Quarterly Report on Form 10-Q:

●

our plans to develop, market and commercialize our product candidates;

●

the initiation, timing, progress and results of our current and future preclinical studies and clinical trials and our research and development programs;

●

our ability to take advantage of expedited regulatory pathways for any of our product candidates;

●

our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

●

our ability to successfully acquire or license additional product candidates on reasonable terms and advance product candidates into, and successfully complete, clinical studies;

●

our ability to maintain and establish collaborations or obtain additional funding;

●

our ability to obtain and timing of regulatory approval of our current and future product candidates;

●

the anticipated indications for our product candidates, if approved;

●

our expectations regarding the potential market size and the rate and degree of market acceptance of such product candidates;

●

our ability to fund our working capital requirements and expectations regarding the sufficiency of our capital resources;

●

the implementation of our business model and strategic plans for our business and product candidates;

●

our intellectual property position and the duration of our patent rights;

●

developments or disputes concerning our intellectual property or other proprietary rights;

●

our expectations regarding government and third-party payor coverage and reimbursement;

●

our ability to compete in the markets we serve;

●

the impact of government laws and regulations and liabilities thereunder;

●

developments relating to our competitors and our industry; and

●

other factors that may impact our financial results.

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The foregoing list of risks is not exhaustive. Other sections of this Quarterly Report on Form 10-Q may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements.

In light of the significant uncertainties in these forward-looking statements, you should not rely upon forward-looking statements as predictions of future events. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur at all. You should refer to the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

Unless the context otherwise requires, the terms “Applied,” “Applied Therapeutics,” “the Company,” “we,” “us,” “our”, “the registrant” and similar references in this Quarterly Report on Form 10-Q refer to Applied Therapeutics, Inc.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Applied Therapeutics, Inc.

Condensed Balance Sheets

(in thousands, except share and per share data)


	As of		As of
	June 30,		December 31,
	2023		2022
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	35,616	$	16,657
Investments		—		13,923
Prepaid expenses and other current assets		7,205		6,728
Total current assets		42,821		37,308
Operating lease right-of-use asset		628		857
Security deposits and leasehold improvements		197		198
TOTAL ASSETS	$	43,646	$	38,363
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)/EQUITY
CURRENT LIABILITIES:
Current portion of operating lease liabilities	$	486	$	477
Accounts payable		4,687		4,534
Accrued expenses and other current liabilities		16,023		14,756
Warrant liability		25,992		13,657
Total current liabilities		47,188		33,424
NONCURRENT LIABILITIES:
Noncurrent portion of operating lease liabilities		170		414
Clinical holdback - long-term portion		622		464
Total noncurrent liabilities		792		878
Total liabilities		47,980		34,302
STOCKHOLDERS’ (DEFICIT)/EQUITY:
Common stock, $0.0001 par value; 200,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 62,119,466 shares issued and outstanding as of June 30, 2023 and 48,063,358 shares issued and outstanding as of December 31, 2022		6		5
Preferred stock, par value $0.0001; 10,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 0 shares issued and outstanding as of June 30, 2023 and December 31, 2022		—		—
Additional paid-in capital		384,197		352,828
Accumulated other comprehensive gain/(loss)		—		51
Accumulated deficit		(388,537)		(348,823)
Total stockholders' (deficit)/equity		(4,334)		4,061
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT)/EQUITY	$	43,646	$	38,363

The Notes to Condensed Financial Statements are an integral part of these statements.

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Applied Therapeutics, Inc.

Condensed Statements of Operations

(in thousands, except share and per share data)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
REVENUE:
License Revenue	$	—	$	—	$	10,660	$	—
Total Revenue		—		—		10,660		—
OPERATING EXPENSES:
Research and development	$	11,883	$	15,396	$	27,818	$	30,426
General and administrative		5,293		6,125		10,876		14,196
Total operating expenses		17,176		21,521		38,694		44,622
LOSS FROM OPERATIONS		(17,176)		(21,521)		(28,034)		(44,622)
OTHER INCOME (EXPENSE), NET:
Interest income		408		111		628		187
Change in fair value of warrant liabilities		(12,804)		(4,357)		(12,335)		(4,357)
Other expense		(5)		(90)		27		(186)
Total other expense, net		(12,401)		(4,336)		(11,680)		(4,356)
Net loss	$	(29,577)	$	(25,857)	$	(39,714)	$	(48,978)
Net loss attributable to common stockholders—basic and diluted	$	(29,577)	$	(25,857)	$	(39,714)	$	(48,978)
Net loss per share attributable to common stockholders—basic and diluted	$	(0.37)	$	(0.96)	$	(0.59)	$	(1.84)
Weighted-average common stock outstanding—basic and diluted		79,041,695		26,901,069		67,762,501		26,560,185

The Notes to Condensed Financial Statements are an integral part of these statements.

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Applied Therapeutics Inc.

Condensed Statements of Comprehensive Income (Loss)

(in thousands)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Net Loss	$	(29,577)	$	(25,857)	$	(39,714)	$	(48,978)
Other comprehensive income (loss)
Unrealized gain (loss) on marketable securities		—		86		(51)		113
Other comprehensive gain (loss), net of tax		—		86		(51)		113
Comprehensive loss, net of tax	$	(29,577)	$	(25,771)	$	(39,765)	$	(48,865)

The Notes to Condensed Financial Statements are an integral part of these statements.

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Applied Therapeutics Inc.

Condensed Statements of Stockholders’ (Deficit)/Equity

(in thousands, except share and per share data)

(Unaudited)



	Common Stock
	$0.0001				Additional				Accumulated Other		Total
	Par Value				Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares		Amount		Capital		Deficit		Income (Loss)		Equity
BALANCE, January 1, 2022		26,215,514	$	3	$	328,958	$	(266,315)	$	(107)	$	62,539
Restricted Stock Units released for common stock issued under Equity Incentive Plan		21,417		—		—		—		—		—
Restricted Stock Units released for common stock not yet issued		(21,417)		—		—		—		—		—
Stock-based compensation expense		—		—		2,077		—		—		2,077
Issuance of options in-lieu of bonus		—		—		441		—		—		441
Net loss		—		—		—		(23,121)		—		(23,121)
Other comprehensive income (loss)		—		—		—		—		27		27
BALANCE, March 31, 2022		26,215,514		3		331,476		(289,436)		(80)		41,963
Issuance of common stock sold for cash, net of issuance costs of $96		20,000,000		2		5,966		—		—		5,968
Exercise of pre-funded warrants for common stock		1,750,000		—		1,417		—		—		1,417
Exercise of pre-funded warrants for common stock not yet issued		(1,750,000)		—		—		—		—		—
Issuance of common stock for Restricted Stock released in prior periods under Equity Incentive Plan		21,417		—		—		—		—		—
Restricted Stock Unit released for common stock issued under Equity Incentive Plan		16,593		—		—		—		—		—
Stock-based compensation expense		—		—		2,231		—		—		2,231
Net loss		—		—		—		(25,857)		—		(25,857)
Other comprehensive income (loss)		—		—		—		—		86		86
BALANCE, June 30, 2022		46,253,524		5		341,090		(315,293)		6		25,808



	Common Stock
	$0.0001				Additional				Accumulated Other		Total
	Par Value				Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares		Amount		Capital		Deficit		Income (Loss)		(Deficit)/Equity
BALANCE, January 1, 2023		48,063,358	$	5	$	352,828	$	(348,823)	$	51	$	4,061
Restricted Stock Units released for common stock issued under Equity Incentive Plan		50,203		—		—		—		—		—
Stock-based compensation expense		—		—		2,055		—		—		2,055
Net loss		—		—		—		(10,137)		—		(10,137)
Other comprehensive income (loss)		—		—		—		—		(51)		(51)
BALANCE, March 31, 2023		48,113,561	$	5	$	354,883	$	(358,960)	$	—	$	(4,072)
Issuance of common stock and prefunded warrants, net of issuance costs of $2.5 million		9,735,731		1		27,449		—		—		27,450
Exercise of prefunded warrants		4,250,000		—		—		—		—		—
Exercise of stock options		20,174		—		22		—		—		22
Stock-based compensation expense		—		—		1,843		—		—		1,843
Net loss		—		—		—		(29,577)		—		(29,577)
Other comprehensive income (loss)		—		—		—		—		—		—
BALANCE, June 30, 2023		62,119,466	$	6	$	384,197	$	(388,537)	$	—	$	(4,334)

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Applied Therapeutics, Inc.

Condensed Statements of Cash Flows

(in thousands)

(Unaudited)


	Six Months Ended
	June 30,
	2023		2022
OPERATING ACTIVITIES:
Net loss	$	(39,714)	$	(48,978)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		3,898		4,308
Issuance of options in-lieu of bonus		—		441
Amortization of insurance premium		1,334		2,024
Amortization of operating lease right-of-use assets		229		217
Amortization of leasehold improvements		1		1
Change in operating lease liability		(235)		(216)
Change in fair value of warrant liability		12,335		4,357
Changes in operating assets and liabilities:
Financed insurance premium		(1,546)		(3,105)
Prepaid expenses		(265)		(524)
Accounts payable		153		(770)
Accrued expenses and other current liabilities		210		(565)
Other liabilities		158		—
Net cash used in operating activities		(23,442)		(42,810)
INVESTING ACTIVITIES:
Purchase of available-for-sale securities		—		(14,987)
Proceeds from sale of available-for-sale securities		4,944		—
Proceeds from maturities of available-for-sale securities		8,928		30,041
Net cash provided by investing activities		13,872		15,054
FINANCING ACTIVITIES:
Proceeds from issuance of common stock and pre-funded warrants		27,890		27,899
Proceeds from financed insurance premium		1,546		3,105
Repayments of short-term borrowings		(928)		(1,408)
Exercise of stock options for common stock under Equity Incentive Plan		21		—
Exercise of warrants		—		—
Net cash provided by financing activities		28,529		29,596
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		18,959		1,840
Cash and cash equivalents at beginning of period		16,657		53,888
Cash and cash equivalents at end of period	$	35,616	$	55,728
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Initial measurement of warrant liability	$	—	$	21,835
Conversion of warrant liability to equity for warrant exercises	$	—	$	1,417
Unrealized gain (loss) on marketable securities	$	(51)	$	113
Offering costs still in accrued expenses	$	440	$	96

The Notes to Condensed Financial Statements are an integral part of these statements.

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Applied Therapeutics, Inc.

Notes to Condensed Financial Statements (Unaudited)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Operations and Business

Applied Therapeutics, Inc. (the “Company”) is a clinical-stage biopharmaceutical company developing a pipeline of novel product candidates against validated molecular targets in indications of high unmet medical need. In particular, the Company is currently targeting treatments for rare metabolic diseases such as Galactosemia, Sorbitol Dehydrogenase (“SORD”) deficiency, and diabetic complications including diabetic cardiomyopathy. The Company was incorporated in Delaware on January 20, 2016 and is headquartered in New York, New York.

On January 26, 2022, the Company entered into an equity distribution agreement (the “Equity Distribution Agreement) with Cowen and Company, LLC (“Cowen”), as a sales agent, to sell shares of the Company’s common stock, from time to time, having an aggregate offering price of up to $100.0 million. Pursuant to the Equity Distribution Agreement shares of our common stock may be offered and sold through the sales agent in sales deemed “at-the-market” offerings under the Securities Act of 1933, as amended, or the Securities Act. Under the Equity Distribution Agreement, the sales agent will be entitled to compensation of up to 3% of the gross offering proceeds of all shares of our common stock sold through it pursuant to the Equity Distribution Agreement. In connection with the sale of shares of our common stock on our behalf, the sales agent may be deemed to be “underwriters” within the meaning of the Securities Act, and the compensation paid to the sales agent may be deemed to be underwriting commissions or discounts. The Equity Distribution Agreement was terminated as of May 12, 2023.

On June 27, 2022, the Company completed an underwritten public offering (the “June Offering”) of 20,000,000 shares of common stock, par value $0.0001 per share, 10,000,000 pre-funded warrants to purchase shares of common stock (the “Pre-Funded Warrants”), and accompanying warrants to purchase up to 30,000,000 shares of common stock (the “Common Warrants”). The shares and accompanying Common Warrants were offered at a price to the public of $1.00 per share and warrant, and the Pre-Funded Warrants and accompanying Common Warrants were offered at a price to the public of $0.9999, resulting in aggregate net proceeds of approximately $27.8 million, after deducting underwriting discounts and commissions and offering expenses. The Pre-Funded Warrants and the Common Warrants are immediately exercisable and will expire five years from the date of issuance. Holders may not exercise any Pre-Funded Warrants or Common Warrants that would cause the aggregate number of shares of common stock beneficially owned by the holder to exceed 9.99% of the Company’s outstanding common stock immediately after exercise. Holders of the Pre-Funded Warrants and/or Common Warrants (together with affiliates) who immediately prior to June 27, 2022 beneficially owned more than 9.99% of the Company’s outstanding common stock may not exercise any portion of their Pre-Funded Warrants or Common Warrants if the holder (together with affiliates) would beneficially own more than 19.99% of the Company’s outstanding common stock after exercise. The Pre-Funded Warrants and Common Warrants are subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock and also upon any distributions for no consideration of assets to the Company’s stockholders. In the event of certain corporate transactions, the holders of the Pre-Funded Warrants and/or Common Warrants will be entitled to receive, upon exercise, the kind and amount of securities, cash or other property that the holders would have received had they exercised the Pre-Funded Warrants and/or Common Warrants immediately prior to such transaction. The Pre-Funded Warrants and Common Warrants do not entitle the holders thereof to any voting rights or any of the other rights or privileges to which the Company’s stockholders are entitled. The Company intends to use the net proceeds from the June Offering for general corporate purposes, which may include research and development costs, including the conduct of clinical trials and process development and manufacturing of the Company’s product candidates, expansion of the Company’s research and development capabilities, working capital and capital expenditures.

On April 26, 2023, the Company completed its sale of a total of 9,735,731 shares of the Company’s common stock, par value $0.0001 (the “Shares”), at a purchase price of $0.946 per Share, and 22,000,000 pre-funded warrants to purchase common stock (the “Pre-Funded Warrants” and together with the Shares, the “Securities”), at a purchase price of $0.946 per Pre-Funded Warrant, in a private placement (the “Private Placement”) to a select group of accredited

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investors (the “Purchasers”), pursuant to a Securities Purchase Agreement (the “Securities Purchase Agreement”), dated as of April 23, 2023, by and between the Company and the Purchasers. The Private Placement resulted in net proceeds to the Company of approximately $27.5 million, after deducting underwriting discounts, commissions and offering expenses. The Pre-Funded Warrants are immediately exercisable from the date of issuance and do not have an expiration date. They have an exercise price of $0.001. Holders may not exercise any Pre-Funded Warrants that would cause the aggregate number of shares of common stock beneficially owned by the holder to exceed 9.99% of the Company’s outstanding common stock immediately after exercise. The Pre-Funded Warrants are subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock and also upon any distributions for no consideration of assets to the Company’s stockholders. In the event of certain corporate transactions, the holders of the Pre-Funded Warrants will be entitled to receive, upon exercise of the Pre-Funded Warrants, the kind and amount of securities, cash or other property that the holders would have received had they exercised the Pre-Funded Warrants immediately prior to such transaction. The Pre-Funded Warrants do not entitle the holders thereof to any voting rights or any of the other rights or privileges to which holders of common stock are entitled. The Company intends to use the net proceeds to fund research and development and registration of its pipeline candidates, and for working capital and general corporate purposes.

The Securities have the benefit of the Registration Rights Agreement (the “Registration Rights Agreement”), dated as of April 23, 2023, by and among the Company and the Purchasers, requiring the Company to prepare and file a registration statement with the SEC as soon as reasonably practicable, but in no event later than May 26, 2023 (the “Filing Deadline”), and to use commercially reasonable efforts to have the registration statement declared effective within 30 days of the Filing Deadline, subject to extension under the terms of the Registration Rights Agreement. The Securities were issued to the Purchasers pursuant to an exemption from registration under Rule 506 of Regulation D, which is promulgated under the Securities Act. The Company relied on this exemption from registration based in part on representations made by the Purchasers. The sale of the Securities pursuant to the Securities Purchase Agreement has not been registered under the Securities Act or any state securities laws. The Securities may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

The accompanying unaudited condensed financial statements have been prepared by the Company in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2022 included in the Annual Report, filed with the SEC on March 23, 2023 (the “Annual Report”).

The unaudited condensed financial statements have been prepared on the same basis as the audited financial statements. In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments which are necessary for a fair presentation of the Company’s financial position as of June 30, 2023, results of operations for the three and six months ended June 30, 2023 and 2022 and cash flows for the six months ended June 30, 2023 and 2022. Such adjustments are of a normal and recurring nature. The results of operations for the three and six months ended June 30, 2023, are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2023.

Liquidity and Going Concern

The Company has incurred, and expects to continue to incur, significant operating losses for the foreseeable future as it continues to develop its drug candidates. To date, the Company has not generated any product revenue, and it does not expect to generate product revenue unless and until it successfully completes development and obtains regulatory approval for one of its product candidates.

Under ASC Topic 205-40, Presentation of Financial Statements - Going Concern, management is required at each reporting period to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about an entity's ability to continue as a going concern within one year after the date that the financial statements are issued. As discussed above, we recently completed a $27.5 million private placement, after deducting

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placement agent commissions and other offering expenses. We continue to actively pursue several potential long-term financing options, including equity capital, debt, convertible debt, and synthetic royalty financing. Additionally, we are in active dialogue with several potential partners regarding business development opportunities related to one or more of our programs. There can be no assurances that our discussions with any of the current counterparties will be successful, and the Company expects to continue to pursue additional opportunities.

As reflected in the accompanying financial statements, the Company incurred a net loss of $39.7 million for the six months ended June 30, 2023 and has an accumulated deficit of $388.5 million as of June 30, 2023. The exclusive licensing agreement with Advanz Pharma for commercialization rights to AT-007 in Europe provides a source of capital to the Company based on clinical and regulatory milestones. We received a $10.7 million upfront payment from Advanz Pharma in January 2023 in conjunction with signing the agreement. If actualization of these milestones aligns with the projected timelines, and product approvals are received in the timeframes expected, this source of capital may be sufficient to cover operating expenses through expected product approvals and potential revenues. However, there are no guarantees that this will materialize timely or at all, and delays or unexpected data could disrupt this potential liquidity. Broadly, the Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and is dependent on debt and equity financing to fund its operations. As of June 30, 2023, our cash and cash equivalents totaled $35.6 million. Given our planned expenditures for the next twelve months, we have concluded there is substantial doubt regarding our ability to continue as a going concern for a year beyond the date this Quarterly Report on Form 10-Q is issued. The accompanying financial statements have been prepared assuming the continuation of the Company as a going concern.

Risks and Uncertainties

The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations and reliance on third-party manufacturers.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the Company's ability to continue as a going concern as of the date of the financial statements and the reported amounts of expenses during the reporting period. In preparing the financial statements, management used estimates in the following areas, among others: prepaid and accrued expenses; warrant liability valuation; stock-based compensation expense; and the evaluation of the existence of conditions and events that raise substantial doubt regarding the Company’s ability to continue as a going concern. Actual results could differ from those estimates.

Significant Accounting Policies

The significant accounting policies and estimates used in preparation of the condensed financial statements are described in the Company’s audited financial statements as of and for the year ended December 31, 2022, and the notes thereto, which are included in the Annual Report. There have been no material changes to the Company’s significant accounting policies during the three and six months ended June 30, 2023.

Clinical hold-back, long-term

As part of the regulatory approval process for taking its products to market, the Company enters into certain Clinical Trial Agreements (CTAs) which include, among other things, the compensation and payment schedule the participating medical institutions and physicians will receive for all costs in connection with the clinical trial (or study) under the terms of the CTA. As individual patients are enrolled in the study by the participating medical institution or physician, the Company pays certain per study fees according to the CTA for the duration of the trial. As invoices are

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received by the Company from the medical institution or physician, the Company retains an agreed upon percentage of total invoiced costs, generally ranging between 5% - 10%, that is withheld from payment until the end of the study.

These retained amounts are recorded as clinical holdback, a liability, on the accompanying balance sheets, and all expenses incurred in connection with these CTA activities are expensed as services are provided, which are included as research and development expenses on the accompanying statements of operations.

The following table shows the activity within the clinical holdback liability accounts for the six months ended June 30, 2023:



(in thousands)
Balance as of December 31, 2022	$	464
Clinical holdback retained		158
Clinical holdback paid		—
Balance as of June 30, 2023	$	622

Recent Accounting Pronouncements

Any recent pronouncements issued by the FASB or other authoritative standards groups with future effective dates are either not applicable or are not expected to be significant to the financial statements of the Company.

2. LICENSE AGREEMENT

Columbia University

In October 2016, the Company entered into a license agreement (the “2016 Columbia Agreement”) with the Trustees of Columbia University (“Columbia University”) to obtain an exclusive royalty-bearing sublicensable license in respect to certain patents. As part of the consideration for entering into the 2016 Columbia Agreement, the Company issued to Columbia University shares equal to 5% of its outstanding common stock on a fully diluted basis at the time of issue. The common stock had a fair value of $0.5 million at the time of issuance. The Company will be required to make further payments to Columbia University of up to an aggregate of $1.3 million for the achievement of specified development and regulatory milestones, and up to an aggregate of $1.0 million for the achievement of a specified level of aggregate annual net sales, in each case in connection with products covered by the 2016 Columbia Agreement. The Company will also be required to pay tiered royalties to Columbia University in the low- to mid-single digit percentages on the Company’s, its affiliates’ and its sublicensees’ net sales of licensed products, subject to specified offsets and reductions. In addition, the Company is required to make specified annual minimum royalty payments to Columbia University, which is contingent upon the approval of the licensed products, in the mid-six figures beginning on the 10th anniversary of the effective date of the 2016 Columbia Agreement. When we grant sublicenses under the 2016 Columbia Agreement we are required to pay Columbia University a portion of the net sublicensing revenue received from such third parties, at percentages between 10% and 20%, depending on the stage of development at the time such revenue is received from such third parties. The Advanz Agreement includes a sublicense under the 2016 Columbia Agreement.

The 2016 Columbia Agreement will terminate upon the expiration of all the Company’s royalty payment obligations in all countries. The Company may terminate the 2016 Columbia Agreement for convenience upon 90 days’ written notice to Columbia University. At its election, Columbia University may terminate the 2016 Columbia Agreement, or convert the licenses granted to the Company into non-exclusive, non-sublicensable licenses, in the case of (a) the Company’s uncured material breach upon 30 days’ written notice (which shall be extended to 90 days if the Company is diligently attempting to cure such material breach), (b) the Company’s failure to achieve the specified development and funding milestone events, or (c) the Company’s insolvency.

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In January 2019, the Company entered into a second license agreement with Columbia University (the “2019 Columbia Agreement”). Pursuant to the 2019 Columbia Agreement, Columbia University granted the Company a royalty-bearing, sublicensable license that is exclusive with respect to certain patents, and non-exclusive with respect to certain know-how, in each case to develop, manufacture and commercialize PI3k inhibitor products. The license grant is worldwide. Under the 2019 Columbia Agreement, the Company is obligated to use commercially reasonable efforts to research, discover, develop and market licensed products for commercial sale in the licensed territory, and to comply with certain obligations to meet specified development and funding milestones within defined time periods. Columbia University retains the right to conduct, and grant third parties the right to conduct, non-clinical academic research using the licensed technology; provided that such research is not funded by a commercial entity or for-profit entity or results in rights granted to a commercial or for-profit entity. As consideration for entering into the 2019 Columbia Agreement, the Company made a nominal upfront payment to Columbia University. The Company will be required to make further payments to Columbia University of up to an aggregate of $1.3 million for the achievement of specified development and regulatory milestones, and up to an aggregate of $1.0 million for the achievement of a specified level of aggregate annual net sales, in each case in connection with products covered by the 2019 Columbia Agreement. The Company will also be required to pay tiered royalties to Columbia University in the low- to mid-single digit percentages on the Company’s, its affiliates’ and its sublicensees’ net sales of licensed products, subject to specified offsets and reductions. In addition, the Company is required to make specified annual minimum royalty payments to Columbia University, which is contingent upon the approval of the licensed products, in the mid-six figures beginning on the tenth anniversary of the effective date of the 2019 Columbia Agreement.

In July 2022, following regulatory changes impacting development of the class of PI3k inhibitors and the Company’s decision to discontinue its early stage preclinical PI3k program, the Company and Columbia entered into an agreement terminating the 2019 Columbia Agreement (the “2022 Columbia Termination Agreement”) as of July 25, 2022. Under the terms of the 2022 Columbia Termination Agreement, the Company assigned certain regulatory documents regarding the preclinical PI3k inhibitor AT-104 to Columbia and granted Columbia a non-exclusive royalty free license (with rights to sublicense any future Columbia licensee) under certain know-how, technical information and data relating to AT-104 that was developed by the Company during the term of the 2019 Columbia Agreement.

In March 2019, and in connection with the 2016 Columbia Agreement, the Company entered into a research services agreement (the “2019 Columbia Research Agreement”) with Columbia University with the purpose of analyzing structural and functional changes in brain tissue in an animal model of Galactosemia, and the effects of certain compounds whose intellectual property rights were licensed to the Company as part of the 2016 Columbia Agreement on any such structural and functional changes. The 2019 Columbia Research Agreement had a term of 12 months from its effective date and expired in accordance with its terms.

On October 3, 2019, and in connection with the 2019 Columbia Agreement, the Company entered into a research services agreement (the “PI3k Columbia Research Agreement” and collectively with the 2016 Columbia Agreement, 2019 Columbia Agreement and 2019 Columbia Research Agreement, the “Columbia Agreements”) with Columbia University with the purpose of analyzing PI3k inhibitors for the treatment of lymphoid malignancies. The PI3k Columbia Research Agreement had a term of 18 months from its effective date and expired in accordance with its terms.

During the three and six months ended June 30, 2023, the Company recorded no research and development expense; and $36,000 and $0.1 million in general and administrative expense, respectively, related to the Columbia Agreements. During the three and six months ended June 30, 2022, the Company recorded no research and development expense and $0.1 million in general and administrative expense related to the Columbia Agreements. In aggregate, the Company has incurred $2.7 million in expense from the execution of the Columbia Agreements through June 30, 2023.

As of June 30, 2023, the Company had $0.1 million due to Columbia University included in accrued expenses. As of December 31, 2022, the Company had $0.1 million due to Columbia University included in accrued expenses. The Company recorded no accounts payable for the period ended June 30, 2023 and December 31, 2022 related to the Columbia Agreements.

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University of Miami

2020 Miami License Agreement

On October 28, 2020, the Company entered into a license agreement with the University of Miami (the “2020 Miami License Agreement”) relating to certain technology that is co-owned by the University of Miami (UM), the University of Rochester (UR) and University College London (UCL). UM was granted an exclusive agency from UR and UCL to license each of their rights in the technology. Pursuant to the 2020 Miami License Agreement, UM, on behalf of itself and UR and UCL, granted the Company a royalty-bearing, sublicensable license that is exclusive with respect to certain patent applications and patents that may grant from the applications, and non-exclusive with respect to certain know-how, in each case to research, develop, make, have made, use, sell and import products for use in treating and/or detecting certain inherited neuropathies, in particular those caused by mutation in the sorbitol dehydrogenase (SORD) gene. The license grant is worldwide. Under the 2020 Miami License Agreement, the Company is obligated to use commercially reasonable efforts to develop, manufacture, market and sell licensed products in the licensed territory, and to comply with certain obligations to meet specified development milestones within defined time periods. UM retains for itself, UR, and UCL the right to use the licensed patent rights and licensed technology for their internal non-commercial educational, research and clinical patient care purposes, including in sponsored research and collaboration with commercial entities.

Under the terms of the 2020 Miami License Agreement, the Company was obligated to pay UM an up-front non-refundable license fee of $1.1 million, and a second non-refundable license fee of $0.5 million due on the first anniversary of the date of the license. The Company will be required to make further payments to UM of up to an aggregate $2.2 million for the achievement of specified patenting and development milestones, and up to an aggregate of $4.1 million for achievement of late stage regulatory milestones. The Company will also be required to pay royalties ranging from 0.88% - 5% on the Company’s, the Company’s affiliates’ and the Company’s sublicensees’ net sales of licensed products. When the Company sublicenses the rights granted under the 2020 Miami License Agreement to one or more third parties, the Company will be required to pay to UM a portion of the non-royalty sublicensing revenue received from such third parties ranging from 15% – 25%. The Advanz Agreement includes a sublicense under the 2020 Miami License Agreement.

The 2020 Miami License Agreement terminates upon the expiration of all issued patents and filed patent applications or 10 years after the first commercial sale of the last product or process for which a royalty is due, unless earlier terminated. In addition, the 2020 Miami License Agreement may be terminated by the Company at any time upon 60 days prior written notice to UM, and may be terminated by either the Company or UM upon material breach of an obligation if action to cure the breach is not initiated within 60 days of receipt of written notice.

During the three and six months ended June 30, 2023 the company recorded $25,000 and $0.1 million in research and development expense related to the Miami License Agreement. During the three and six months ended June 30, 2023, there were no general and administrative expense related to 2020 Miami License Agreement.

During the three and six months ended June 30, 2022 the Company recorded $25,000 and $0.1 million in research and development expense related to the 2020 Miami License Agreement. During the three and six months ended June 30, 2022, the company recorded $2,000 in general and administrative expense related to the 2020 Miami License Agreement. In aggregate, the Company has incurred $2.4 million in expense from execution of the 2020 Miami License Agreement through June 30, 2023.

As of June 30, 2023 and December 31, 2022, the Company had $0.3 million due to UM included in accrued expenses relating to the 2020 Miami License Agreement.

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2020 Miami Option Agreement

On October 28, 2020, the Company entered into an option agreement with the University of Miami (the “2020 Miami Option Agreement”) concerning certain research activities and technology relating to SORD neuropathy that may be pursued and developed by UM. Under the 2020 Miami Option Agreement, if UM conducts such research activities, then UM is obligated to grant us certain option rights to access and use the research results and to obtain licenses to any associated patent rights upon us making specified payments to UM within specified time limits. If the Company elects to obtain option rights the Company will be required to make payments to UM in the low-six figures to the low-seven figures, depending upon the rights the Company elects to obtain, and the Company will be obligated to make certain milestone payments in the high-six figures to mid-seven figures if UM conducts and completes certain research activities within specified time periods and the Company elects to receive rights to use the results of that research.

2020 Miami Sponsored Research Agreement

On December 14, 2020, the Company entered into a research agreement with the University of Miami (the “2020 Miami Research Agreement”), under which the University of Miami will conduct a research study relating to SORD neuropathy and deliver a final report on the study to the Company. The term of the research agreement is from December 14, 2020 through December 30, 2021, and was extended through August 31, 2022, whereby the research study was completed. The total consideration for the 2020 Miami Research Agreement was $0.3 million.

During the three and six months ended June 30, 2023, the Company recorded no research and development expense in relation to the 2020 Miami Research Agreement. During the three and six months ended June 30, 2022 , the Company recorded $11,000 and $48,000 in research and development expense in relation to the 2020 Miami Research Agreement.

As of June 30, 2023, and December 31, 2022, the Company had $0.1 million in accrued expenses relating to the 2020 Miami Research Agreement.

Bayh-Dole Act

Some of the intellectual property rights the Company has licensed, including certain rights licensed in the agreements described above, may have been generated through the use of U.S. government funding. As a result, the U.S. government may have certain rights to intellectual property embodied in the Company’s current or future product candidates under the Bayh-Dole Act of 1980, or Bayh-Dole Act, including the grant to the government of a non-exclusive, worldwide, freedom to operate license under any patents, and the requirement, absent a waiver, to manufacture products substantially in the United States. To the extent any of the Company’s current or future intellectual property is generated through the use of U.S. government funding, the provisions of the Bayh-Dole Act may similarly apply.

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3. FAIR VALUE MEASUREMENTS

The following tables summarize, as of June 30, 2023, the Company’s financial assets and liabilities that are measured at fair value on a recurring basis, according to the fair value hierarchy described in the significant accounting policies in the Company’s audited financial statements as of and for the year ended December 31, 2022, and the notes thereto, which are included in the Annual Report.


	As of June 30, 2023
(in thousands)	Level 1		Level 2		Level 3		Total
Cash	$	8,291	$	—	$	—	$	8,291
Money market funds		27,325		—		—		27,325
Total cash and cash equivalents	$	35,616	$	—	$	—	$	35,616
U.S. government agency debt securities		—		—		—		—
Total marketable securities	$	—	$	—	$	—	$	—
Total financial assets measured at fair value on a recurring basis	$	35,616	$	—	$	—	$	35,616
Warrant liabilities - Common Warrants		—		—		25,992		25,992
Total financial liabilities measured at fair value on a recurring basis	$	—	$	—	$	25,992	$	25,992

The following tables summarize, as of December 31, 2022, the Company’s financial assets and liabilities that are measured at fair value on a recurring basis


	As of December 31, 2022
(in thousands)	Level 1		Level 2		Level 3		Total
Cash	$	1,337	$	—	$	—	$	1,337
Money market funds		15,320		—		—		15,320
Total cash and cash equivalents	$	16,657	$	—	$	—	$	16,657
U.S. government agency debt securities		—		13,923		—		13,923
Total marketable securities	$	—	$	13,923	$	—	$	13,923
Total financial assets measured at fair value on a recurring basis	$	16,657	$	13,923	$	—	$	30,580
Warrant liabilities - Common Warrants		—		—		13,657		13,657
Total financial liabilities measured at fair value on a recurring basis	$	—	$	—	$	13,657	$	13,657

Investments in U.S. government agency debt securities have been classified as Level 2 as they are valued using quoted prices in less active markets or other directly or indirectly observable inputs. Fair values of U.S. government agency debt securities were derived from a consensus or weighted average price based on input of market prices from multiple sources at each reporting period. During the period ended June 30, 2023 and December 31 2022, there were no transfers of financial assets between Level 1 and Level 2.

On June 27, 2022 the Company issued Common Warrants exercisable for 30,000,000 shares of common stock and Pre-Funded Warrants exercisable for 10,000,000 shares of common stock in connection with the June Offering (see note 1 and note 8 for more information on the June Offering). The Common Warrants were accounted for as liabilities under ASC 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40”), as these warrants provide for a settlement provision that does not meet the requirements of the indexation guidance under ASC 815-40. The Pre-Funded Warrants were initially recorded at fair value as a liability as the Company could be required to settle the Pre-Funded Warrants in cash under certain circumstances. In December 2022, the Company amended the Pre-Funded Warrants to remove the potential requirement that they could be settled in cash under certain circumstances. Upon the amendment to the Pre-Funded Warrants, the Pre-funded Warrants liability was reclassified to equity, using their fair value as of the amendment date.

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These Common Warrant liabilities were measured at fair value at inception and are then subsequently measured at fair value on a recurring basis, with changes in fair value recognized in other income (expense) within the Company’s statement of operations.

The Company uses a Black-Scholes option pricing model to estimate the fair value of the Common and Pre-Funded Warrants, which utilizes certain unobservable inputs and is therefore considered a Level 3 fair value measurement. Certain inputs used in this Black-Scholes pricing model may fluctuate in future periods based upon factors that are outside of the Company’s control, including a potential change in control outside of the Company’s control. A significant change in one or more of these inputs used in the calculation of the fair value may cause a significant change to the fair value of the Company’s warrant liabilities, which could also result in material non-cash gains or losses being reported in the Company’s condensed statement of operations.

The Common Warrants were remeasured using a Black-Scholes option pricing model with a range of assumptions included below as of June 30, 2023 and December 31, 2022. The Pre-Funded warrants were remeasured and reclassified to equity using the Black-Scholes option pricing model with a range of assumptions included below as of December 31, 2022:


	June 30,		December 31,
	2023		2022
Expected term (in years)	3.2		3.7
Volatility	97.85	%	91.53	%
Risk-free interest rate	4.54	%	4.11	%
Dividend yield	0.00	%	0.00	%

As of June 30, 2023, the Company utilized a probability-weighted approach that considered the probability of a change in control at the Company in the Black-Scholes option pricing model, whereby a 12.5% probability of change in control was used for each of the remaining years in the term of the agreements.

As of December 31, 2022, the Company utilized a probability-weighted approach that considered the probability of a change in control at the Company in the Black-Scholes option pricing model, whereby a 10.0% probability of change in control was used for each of the remaining years in the term of the agreements.

The following table provides a roll forward of the aggregate fair values of the Company’s warrant liability, for which fair value is determined using Level 3 inputs (in thousands):



	Warrant Liability
Balance as of January 1, 2023	$	13,657
Initial fair value of Warrant Liability		—
Warrants exercised		—
Change in fair value		12,335
Reclassification of pre-funded warrant liability to equity		—
Balance as of June 30, 2023	$	25,992

The inputs utilized by management to value the warrant liability are highly subjective. The assumptions used in calculating the fair value of the warrant liability represent the Company’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the fair value of the warrant liability may be materially different in the future.

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4. INVESTMENTS

Marketable Securities

Marketable securities, which the Company classifies as available-for-sale securities, primarily consist of U.S. government debt obligations. Marketable securities with remaining effective maturities of twelve months or less from the balance sheet date are classified as short-term; otherwise, they are classified as long-term on the balance sheets.

The following tables provide the Company’s marketable securities by security type:


	As of June 30, 2023								As of December 31, 2022
			Gross		Gross						Gross		Gross
			Unrealized		Unrealized		Estimated				Unrealized		Unrealized		Estimated
(in thousands)	Cost		Gains		Losses		Fair Value		Cost		Gains		Losses		Fair Value
US government agency debt security	$	—	$	—	$	—	$	—	$	13,873	$	50	$	—	$	13,923
Total	$	—	$	—	$	—	$	—	$	13,873	$	50	$	—	$	13,923

As of June 30, 2023, the Company had $0 in its investment portfolio.

Contractual maturities of the Company’s marketable securities are summarized as follows:

As of June 30, 2023

As of December 31, 2022

Gross

Unrealized

Estimated

Unrealized

Estimated

(in thousands)

Cost

Gains

Losses

Fair Value

Cost

Gains

Losses

Fair Value

Due in one year or less

—

Applied Therapeutics Inc. [APLT] Filings
10-Q	[2023-08-10]
10-Q	[2023-05-11]
10-K	[2023-03-23]
10-Q	[2022-11-09]
10-Q	[2022-08-12]
10-Q	[2022-05-12]
10-K	[2022-03-10]
10-Q	[2021-11-12]
10-Q	[2021-08-12]
10-Q	[2021-05-11]
10-K	[2021-03-18]
10-Q	[2020-11-12]
10-Q	[2020-08-11]
10-Q	[2020-05-11]
10-K	[2020-03-13]
S-1	[2020-01-21]
S-1	[2019-12-13]
10-Q	[2019-11-13]
10-Q	[2019-08-12]
10-Q	[2019-06-21]
S-1	[2019-04-12]