Business context and reporting period
Entity note: The supplied filing is Millendo Therapeutics, Inc.’s Form 10-Q, not a filing under the name Tempest Therapeutics, Inc. It covers the quarter ended September 30, 2019, and was filed November 13, 2019.
Millendo was a clinical-stage biopharmaceutical company developing treatments for orphan endocrine diseases. It had no approved products and generated no product-sales revenue. Its principal programs were livoletide for Prader-Willi syndrome (PWS), nevanimibe for congenital adrenal hyperplasia (CAH), and preclinical candidate MLE-301 for vasomotor symptoms.
Financial performance and position
Amounts below are in millions of U.S. dollars unless stated otherwise.
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $7.3 | $3.9 | $19.5 | $9.8 |
| General and administrative expense | $4.4 | $3.9 | $13.1 | $7.3 |
| Net loss | $(11.6) | $(7.9) | $(31.9) | $(17.3) |
| Operating cash used | Not presented quarterly | $(29.5) | $(14.4) |
Gross margin and operating margin are not meaningful because the company had no product revenue. Q3 net loss per share was $0.87, compared with $10.61 in Q3 2018; the comparison is heavily affected by the increase in weighted-average shares following the December 2018 reverse merger and recapitalization.
At September 30, 2019, cash and cash equivalents were $47.2 million, restricted cash was $1.2 million, and marketable securities were nil, for combined cash, cash equivalents, marketable securities and restricted cash of $48.3 million. Total assets were $58.5 million, total liabilities $13.7 million, and stockholders’ equity $44.8 million. Debt was approximately $0.4 million. Operating lease liabilities totaled $4.5 million.
Nine-month net cash use was $29.5 million in operating activities; investing activities provided $4.0 million, principally from sale of marketable securities; and financing activities provided $0.1 million. Cash, cash equivalents and restricted cash decreased by $25.4 million over the period.
Material changes versus prior comparable periods
- Q3 R&D expense rose 88.8% year over year, mainly from livoletide clinical-development spending; nine-month R&D expense nearly doubled, with livoletide the primary development-cost driver.
- Q3 G&A expense increased 12.9%; nine-month G&A increased 78.1%, reflecting added headcount, stock compensation, public-company costs, insurance and facilities. Prior-year merger and financing legal/accounting costs partly offset the Q3 increase.
- Nine-month net loss increased 84.0% year over year, while operating cash use rose from $14.4 million to $29.5 million.
- The company discontinued its Phase 2 Cushing’s syndrome trial and suspended nevanimibe development for that indication in August 2019 because enrollment was slower than anticipated. It said it did not expect further material expenses for that program.
- Adoption of lease accounting in 2019 added operating lease right-of-use assets and liabilities to the balance sheet. The 2018 comparative figures were not restated.
Comparisons with 2018 should be read in light of the December 2018 reverse merger: the filing accounts for the transaction as a reverse acquisition, and prior-period operating results relate to Private Millendo. Share and per-share amounts were retroactively adjusted for the merger exchange ratio.
Outlook, risks and unusual items
- Management believed the $48.3 million of cash, cash equivalents, marketable securities and restricted cash would fund current operating plans through Q4 2020, including through topline results from the livoletide Phase 2b study portion. Millendo also stated it would likely need additional capital; its $50 million at-the-market equity facility had not been used as of the filing.
- The livoletide Phase 2b/3 trial’s Phase 2b portion was fully recruited for ages 8–65 as of November 13, 2019; topline results were expected in the first half of 2020. Recruitment was planned for children ages 4–7 following a protocol amendment.
- For nevanimibe in CAH, Cohort 1 topline results were expected in the second half of 2020, revised from the previously expected first half of 2020. Management planned to update expected Cohort 2 timing in Q1 2020. MLE-301 remained in preclinical work, with first-in-human trials expected to begin in 2020.
- Key risks include clinical-trial failure or delays, patient enrollment, regulatory approval, manufacturing and commercialization execution, competition, and the need for further financing. Additional equity financing could dilute existing holders; financing or collaboration terms could constrain operations or require rights to be surrendered.
- Three legacy shareholder lawsuits related to OvaScience remained disclosed. The Dahhan class action was in discovery; the other derivative matters were stayed. The company said it could not estimate potential losses. An adverse resolution of the class action could materially affect financial position or results.
- Management concluded disclosure controls were effective at a reasonable-assurance level and reported no material quarterly change in internal control over financial reporting. Separately, the filing’s risk factors stated that the company had not completed the prior year-end internal-control assessment and intended its first assessment as of December 31, 2019.
Important facts for investors to verify
- Confirm the issuer identity: this filing is for Millendo Therapeutics, Inc., whereas the request names Tempest Therapeutics, Inc.
- Track cash burn against the stated Q4 2020 runway, and check whether the company draws on its ATM facility or obtains other financing.
- Verify actual timing and results for the livoletide Phase 2b study and both CAH cohorts against the stated expectations.
- Assess whether R&D spending, headcount and lease commitments remain consistent with the company’s development plans.
- Monitor the OvaScience-related litigation and the outcome of the planned year-end internal-control assessment.