After its rare disease drug was rejected by the FDA in late November, Applied Therapeutics vowed to fight on with a resubmission or appeal. But a new lawsuit, filed Dec. 17 in a New York federal court, alleges the company was overly optimistic in its statements leading up to the rejection.
By withholding information about problems with the phase 3 trial of its drug candidate govorestat, the lawsuit alleges, Applied misled investors into thinking the drug had a stronger chance of approval than it actually did. These investors then suffered financial losses when the drug was rejected and Applied’s stock price plummeted.
Bloomberg Law published a copy of the lawsuit online Wednesday. In addition, numerous law firms have published press releases seeking clients who lost money.
Besides Applied Therapeutics as a company, the lawsuit also lists CEO Shoshana Shendelman, Ph.D., and Chief Medical Officer Riccardo Perfetti, M.D., Ph.D., as defendants.
Applied received a warning letter from the FDA on Nov. 27 for its conduct during the trial, which tested govorestat in 47 children with classic galactosemia, a rare disease that interferes with the body’s carbohydrate metabolism.
The FDA found that a trial site had initially underdosed patients, with Applied notifying sites of the error on June 17, 2021, and supplying sites with a corrected formulation on June 29 of that year. Additionally, a third-party vendor of Applied deleted electronic patient data on March 27, 2024, two days after the FDA announced it would be inspecting a clinical site, according to the FDA warning letter.
Despite knowing about these issues, the lawsuit alleges, Applied did not publicly disclose them. Throughout 2024, the company put forth press releases highlighting data showing govorestat is effective in another indication and quarterly results detailing plans for its approval in classic galactosemia and commercial launch, the lawsuit notes.
These actions, the lawsuit claims, were part of a “plan, scheme, conspiracy and course of conduct” to “deceive the investing public” and “artificially inflate and maintain the market price of Applied Therapeutics common stock.”
The proposed class action seeks to represent investors who purchased or otherwise acquired Applied Therapeutics securities between Jan. 3 and Dec. 2, according to the court filing.