Tempest Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2021; filed November 10, 2021. Tempest is a clinical-stage oncology company with two Phase 1 solid-tumor programs, TPST-1495 and TPST-1120, and a preclinical TREX-1 antagonist. It has no approved products and has generated no product revenue.
Financial performance and position
Dollar amounts below are in millions, except per-share data. The company reported no revenue, so profit margins are not meaningful.
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Research and development expense | $4.63 | $4.27 | $12.45 | $11.39 |
| General and administrative expense | $3.11 | $1.16 | $7.20 | $3.58 |
| Operating loss | $7.74 | $5.43 | $19.65 | $14.98 |
| Interest expense | $0.44 | — | $0.94 | — |
| Net loss | $8.11 | $5.43 | $20.52 | $14.89 |
| Net loss per share, basic and diluted | $1.21 | $11.22 | $7.49 | $31.91 |
At September 30, 2021, cash and cash equivalents were $59.7 million, restricted cash was $0.045 million, and current assets totaled $62.6 million versus current liabilities of $6.2 million. Total liabilities were $23.6 million; the company reported $43.5 million in stockholders’ equity and an accumulated deficit of $92.3 million. The balance sheet included a $15.0 million loan payable, net of discount and issuance costs.
For the first nine months of 2021, operating cash use was $18.0 million, investing cash use was $0.07 million, and financing cash provided was $59.1 million. Financing included $15.0 million of loan proceeds, approximately $30.0 million from common-stock financing, $17.0 million of cash acquired in the Millendo merger, and $6.4 million of merger transaction costs. Net cash increased $40.9 million.
Changes and notable transactions
- Q3 research and development expense increased about 8% year over year; management cited higher outside-service, insurance, and compensation costs. Nine-month R&D expense rose about 9%, mainly from compensation and consulting services.
- Q3 general and administrative expense increased about $1.9 million year over year, primarily from compensation, merger-related audit and tax fees, insurance, and rent. The nine-month increase was about $3.6 million.
- Private Tempest merged with Millendo on June 25, 2021. The transaction was accounted for as a reverse recapitalization, with Private Tempest treated as the accounting acquirer; no goodwill or intangible assets were recognized. Legacy Millendo programs and collaboration arrangements had been terminated, and the company was winding down those operations.
- In July 2021, Tempest established an at-the-market sales agreement allowing up to $100 million of common-stock sales through Jefferies, at a 3% agent commission. The filing does not state that the full amount was sold.
Outlook, risks, and unusual items
- Management expects operating losses and expenses to increase for at least the next several years as clinical development advances and public-company costs rise. It estimated that September 30 cash would fund operating expenses and capital needs into early 2023, based on its current operating plan.
- The Oxford loan provides a potential additional $10 million Tranche B through March 31, 2022, subject to specified financing and clinical-development milestones; a further $10 million Tranche C is at the lender’s option. The loan matures August 1, 2025, carries a floating annual rate reported as 7.15%, and scheduled monthly principal payments begin March 2023.
- The company says additional capital will be required and may come from equity, debt, or business-development arrangements. Financing may be unavailable or dilutive; inability to obtain funds could force delays, reductions, or termination of development programs. Management says the company’s ability to continue as a going concern depends on successfully securing financing and ultimately attaining profitability.
- Key risks include clinical-trial safety, efficacy, enrollment and timing; regulatory approval; competition; reliance on third-party manufacturers and service providers; intellectual-property protection; and potential COVID-19 disruptions to trials, supply, and financing.
- Disclosure controls and procedures were not effective at a reasonable-assurance level due to material weaknesses involving insufficient accounting resources and controls over clinical-trial expense accruals. Management was implementing a remediation plan but could not assure when or whether it would be completed.
- Three inherited OvaScience shareholder matters remained outstanding. The company could not estimate potential losses, but considered the claims without merit and any material exposure remote in light of insurance. No material indemnification claims were recorded.
- Unusual items included approximately $0.2 million of merger-related accelerated stock-compensation expense and $278,000 of forgiven employee notes recognized as compensation in the nine-month period.
Most important facts for investors to verify
- Whether the stated early-2023 cash runway remains supportable as clinical spending increases, and what financing has been raised or used after quarter-end.
- Whether the milestones for the potential Oxford Tranche B are achieved, and whether the lender exercises its Tranche C option.
- Clinical-trial progress, enrollment, safety findings, and development timelines for TPST-1495 and TPST-1120, as well as the planned TREX-1 candidate-selection timing.
- Progress in remediating the material weaknesses and improving clinical-trial accrual controls.
- Potential dilution from the $100 million ATM facility, outstanding options and warrants, and any future equity issuance.
- The filing reports 6,900,731 common shares issued and outstanding on the balance sheet, 6,900,595 in the equity statement, and 6,910,324 shares outstanding on November 8, 2021; investors should confirm the applicable share counts and timing.