Cycle Pharmaceuticals is circling up Applied Therapeutics, acquiring the rare disease biotech after an extremely tumultuous year for the latter that began with an FDA rejection at the end of 2024.
British biopharma Cycle has extended a tender offer to buy all outstanding shares of Applied common stock for 8.8 cents per share in cash payable at closing, according to a Dec. 11 release shared hours after market close. As of yesterday, Applied’s stock rested at 22 cents per share.
The Cycle offer also includes one nontransferable contingent value right (CVR) that provides the possibility for Applied stockholders to receive additional payments if certain requirements are met.
Applied’s lead candidate is a selective aldose reductase inhibitor called govorestat, an asset that failed to hit primary endpoints in late-stage trials for a progressive neuromuscular disease called Charcot-Marie-Tooth sorbitol dehydrogenase deficiency (CMT-SORD) and the severe genetic disorder classic galactosemia.
Cycle’s offer promises up to 10 cents per CVR if the FDA approves a new drug application for govorestat in any galactosemia indication within the next eight years, according to the terms of the deal. The company is offering the same amount, up to 10 cents per CVR, for a U.S. regulatory nod in SORD before the eighth anniversary of the deal closing, as well.
The CVR also includes up to 20 cents in cash payable if the global sales of any product covered by the CVR hit or surpass $200 million in any one-year time span within 10 years of closing.
The deal also includes an unsecured promissory note that allows Cycle to loan Applied up to $8.5 million to finance the biotech’s “working capital needs under an approved budget.” Without the Cycle loan or funds from another source, Applied would expect to start winding down operations, according to the company.
As of Sept. 30, the New York-based biotech had $11.9 million in cash and cash equivalents, according to a November filing with the Securities and Exchange Commission (SEC).
Applied Tx’s board has unanimously greenlighted the acquisition, which is slated to close in the first quarter of next year if customary conditions are met.
The offer comes after an “extensive evaluation of strategic alternatives” by the rare disease biotech.
The company has suffered setback after setback over the last year. Most recently, Applied laid off 46% of its workforce at the end of November to conserve its remaining cash. The biotech entered the year with 35 full-time staffers.
A week before the layoffs, Applied finally received official minutes from a September meeting with the FDA to agree on a path forward for govorestat. But, instead of finalizing the regulatory submission plan for the drug as had been expected, Applied suggested that another meeting with the agency would be required.
Now, the company has informed its remaining employees of the acquisition in a Dec. 11 internal letter, as shared in SEC filings.
“We recognize you will have questions,” interim CEO and Chief Financial Officer Les Funtleyder wrote to staff.
“Some details, such as integration planning and leadership structure, will be determined during the integration process, and it is too early to speculate on those topics,” Funtleyder continued. “We are committed to keeping you informed throughout this process and will share additional information as it becomes available.”
The biotech’s troubles can be traced back to a December 2024 FDA rejection for govorestat in children with classic galactosemia. A phase 3 trial missed its primary endpoint in 2023, but Applied said the study still demonstrated consistent and sustained benefit tied to the drug candidate on multiple measures.
The agency also issued a warning letter related to the govorestat study, specifically taking issue with electronic data deletion by a third-party vendor and a dosing error that led to some patients initially receiving lower levels of govorestat than intended.
The hits kept coming, with former CEO Shoshana Shendelman, Ph.D., departing mere days after she and the company were named in a proposed class-action lawsuit.
Then, in May, Applied’s candidate failed to show improvements in a 10-meter walk-run test when compared to placebo a phase 2/3 study for CMT-SORD. Applied caveated this failure by pointing out that since the trial was launched, the 10-meter test had been removed as an element of the CMT Functional Outcome Measure.