When short sellers began raising questions about New York-based Applied Therapeutics’ treatment for a rare metabolic disorder, the company could have ignored the investors. Or tried to prove them wrong. Instead, I’ve learned, the company deployed heavy-handed legal tactics to scare them into silence.
In July 2020, Applied was worth more than $1 billion when an anonymous short seller posted an online research report that pointed out misrepresentations in the company’s presentations of data on the drug called AT-007 — making the therapy appear more effective than it really was. The report warned investors that Applied stock price was “wildly overvalued” and that the company had a “zero chance” of securing FDA approval based on biomarker data.
Applied responded within days to the short seller’s criticism by issuing a press release claiming the report contained “fabricated” information that was being used for the “apparent purpose of manipulating the company’s stock price.” The author’s “criminal activity” should be prosecuted, the company added.
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