Tempest Therapeutics, Inc. — Q3 2023 Form 10-Q
Business context and reporting period. This clinical-stage oncology company reported for the quarter and nine months ended September 30, 2023. It has no approved products and generated no product revenue. Its clinical programs include TPST-1120, a PPARα antagonist, and TPST-1495, a dual EP2/EP4 antagonist; it is also developing a preclinical TREX-1 inhibitor.
Financial performance and position
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $4.2 million (2022: $6.0 million) | $13.3 million (2022: $16.7 million) |
| General and administrative expense | $2.4 million (2022: $2.8 million) | $8.3 million (2022: $9.0 million) |
| Net loss | $6.8 million (2022: $8.9 million) | $22.0 million (2022: $26.6 million) |
| Basic and diluted loss per share | $0.48 (2022: $0.66) | $1.57 (2022: $2.46) |
At September 30, cash and cash equivalents were $11.1 million, down from $31.2 million at December 31, 2022. Nine-month operating cash use was $21.2 million, investing cash use was $0.2 million, and financing provided $1.3 million. Cash, cash equivalents and restricted cash totaled $11.5 million at period end; this includes $0.4 million of restricted cash.
Total liabilities were $25.2 million and stockholders’ equity was negative $1.2 million. The Oxford Finance loan had a net carrying value of approximately $10.5 million, with a 7.15% floating annual interest rate and maturity on August 1, 2025. The loan is secured by company assets, including intellectual property. The interest-only period was subsequently extended through June 30, 2024; monthly principal payments of $0.733 million are scheduled to begin July 1, 2024. Operating lease liabilities totaled $10.5 million.
No operating margin is reported because the company has no revenue. The filing reports no income tax provision for the periods shown.
Changes versus the prior comparable period
- Q3 net loss improved by $2.2 million year over year; nine-month net loss improved by $4.6 million.
- R&D expense declined 29% in Q3 and 20% for the nine months, primarily due to lower contract research organization and third-party vendor costs. G&A expense also declined modestly.
- Nine-month operating cash use decreased by $3.4 million year over year, but cash declined by $20.1 million in 2023 compared with $8.7 million in 2022, reflecting substantially lower financing proceeds.
- Common shares outstanding increased from 10.5 million at December 31, 2022 to 14.3 million at September 30, 2023. Further substantial issuance followed in October and November.
Outlook, commentary, risks and notable items
- Liquidity outlook: Between October 12 and November 7, 2023, Tempest sold 4.9 million shares through its ATM program for approximately $23.9 million net. Management stated that period-end cash plus these proceeds would fund projected requirements for at least 12 months following issuance of the financial statements. The company expects continuing losses and says additional capital will be needed to continue operations.
- Clinical development: In an October 11, 2023 update on a randomized Phase 1b/2 HCC trial, TPST-1120 plus atezolizumab and bevacizumab showed a confirmed objective response rate of 30% (40 patients), versus 13.3% (30 patients) for standard of care. The filing also describes favorable progression-free and overall survival hazard ratios, but provides no clear hazard-ratio values. Overall survival data were expected in 2024. These are clinical-trial results, not proof of approval or commercial benefit.
- Milestones: The company planned to advance TPST-1120 toward a registrational first-line liver cancer study, likely with a partner; report TPST-1495 combination-trial data in 2024; and select a TREX-1 development candidate by the end of 2023 or early 2024.
- Financing and dilution: The ATM program had approximately $93 million of capacity remaining at September 30, before the subsequent share sales. Additional equity financing may dilute shareholders; debt or partnerships may impose restrictions or require relinquishing rights.
- Debt and contingencies: Oxford’s lien covers company assets, including intellectual property, and the loan includes covenants and default remedies. The filing reports that two legacy shareholder actions were dismissed or settled with court approval in 2023; it reports no material indemnification claims.
- Rights plan: A limited-duration stockholder rights plan was adopted October 10, 2023. It is scheduled to expire October 10, 2024, or October 10, 2026 if stockholders approve it, unless earlier redeemed or exchanged.
- Principal risks: Clinical and regulatory failure or delay, dependence on outside manufacturers and research providers, competition, intellectual-property challenges, ongoing cash burn and financing needs, loan covenants, and volatility or limited liquidity in the stock. Management reported disclosure controls were effective at the reasonable-assurance level and no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Whether the TPST-1120 HCC results are confirmed in mature data, including survival outcomes, follow-up, safety, and the planned next-trial design.
- Actual cash burn and runway after the $23.9 million net ATM financing, including the impact of clinical-program spending and further share issuance.
- Oxford loan covenant compliance, repayment schedule, interest-rate exposure, and the conditions attached to the extended interest-only period.
- Progress and timing for TPST-1495 trial data and TREX-1 candidate selection, and whether the planned milestones have changed.
- Potential dilution and control implications of subsequent ATM sales and the stockholder rights plan.