Applied Therapeutics' (APLT) lead drug govorestat faces "significant uncertainties" around a regulatory path in galactosemia after the US Food and Drug Administration rejected its application, although it still has a potential path forward in sorbitol dehydrogenase, or SORD, deficiency, RBC Capital Markets said in a note Friday.

Applied Therapeutics said earlier this week that the FDA rejected its new drug application for govorestat in galactosemia, citing deficiencies in the clinical package.

RBC analysts said the company would likely need to conduct another clinical trial, "pushing back galactosemia timelines meaningfully and adding considerable risk." This would push the timeline of govorestat in galactosemia by at least three years and reduce the program's probability of success to 20% from the previous estimate of 70%, the analysts said.

Applied Therapeutics plans to file a new drug application for govorestat in SORD deficiency in Q1, but "there remain uncertainties as to whether [Applied Therapeutics] can assemble a convincing enough data package," according to the note.

The investment bank downgraded the stock rating to sector perform, speculative risk from outperform, and cut its price target to $4 from $12.