Tempest Therapeutics, Inc. — Q1 2023 Form 10-Q
Business context and reporting period
Quarter ended March 31, 2023; financial statements are unaudited. Tempest is a clinical-stage oncology company with no approved products and no product sales. Its clinical programs are TPST-1120, a PPARα antagonist, and TPST-1495, a dual EP2/EP4 antagonist; it is also developing preclinical programs, including a TREX-1 inhibitor.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 / prior date |
|---|---|---|
| Revenue | None from product sales | None |
| Research and development expense | $4.678 million | $5.109 million |
| General and administrative expense | $2.903 million | $3.052 million |
| Operating loss | $7.581 million | $8.161 million |
| Net loss | $7.636 million | $8.491 million |
| Net loss per share | $0.55 | $1.18 |
| Cash used in operating activities | $8.303 million | $7.107 million |
| Cash and cash equivalents | $22.925 million | $31.230 million at Dec. 31, 2022 |
As a pre-revenue development-stage company, revenue margins are not applicable. Cash, cash equivalents and restricted cash totaled $23.293 million at quarter-end. Total assets were $37.329 million, total liabilities $26.364 million, and stockholders’ equity $10.965 million. Accumulated deficit was $143.408 million.
Oxford Finance loan carrying value was approximately $10.4 million, net of discounts and issuance costs. The floating annual rate was 7.15%; the loan matures August 1, 2025. Interest-only payments run through December 31, 2023, with a possible extension under certain conditions; monthly principal payments of approximately $513,000 are scheduled to begin January 1, 2024. The loan is secured by company assets, including intellectual property. Operating lease liabilities totaled $11.243 million.
Material changes versus the prior comparable period
- Net loss narrowed by $855,000, while operating loss narrowed by $580,000 year over year.
- R&D expense declined $431,000, mainly due to lower contract research organization and other vendor costs, partly offset by higher personnel and facilities costs. G&A declined $149,000, primarily due to lower consulting and professional services.
- Operating cash use increased by $1.196 million year over year. Cash and cash equivalents decreased $8.305 million from year-end 2022.
- Interest income and other income rose to $289,000 from $3,000, partly offsetting interest expense of $344,000, compared with $333,000 in Q1 2022.
Outlook, development updates, and risks
- Management expects existing cash and cash equivalents to fund planned requirements for at least 12 months following issuance of the financial statements. The company expects continuing losses and says additional capital will be needed; potential sources include debt, equity, merger-related financing, or business-development arrangements. There is no committed external funding source.
- The TPST-1120 global randomized Phase 1b/2 HCC trial was fully enrolled. The filing reports April 2023 interim results based on a February cutoff: among 40 patients in the TPST-1120 arm and 29 evaluable control patients, unconfirmed response rates were 30% versus 17.2%, and confirmed rates were 17.5% versus 10.3%. These are interim results and may change. Management expected more mature response data and potentially PFS and OS data in the second half of 2023 or first half of 2024.
- TPST-1495 was in an ongoing Phase 1 monotherapy and combination trial; management expected to present data at ASCO in June 2023. The company planned to select a TREX-1 development candidate during 2023.
- Key risks include clinical and regulatory uncertainty, reliance on third-party research and manufacturing providers, need for additional financing, possible dilution, and Oxford’s security interest and loan covenants. The company also cited the SEC “baby shelf” limitation because public float was below $75 million, and warned of potential cash-access risks from financial-market or banking disruption.
- Legacy litigation includes the Cima derivative action, for which a settlement received preliminary court approval in March 2023 and remained subject to final approval, and Chiu v. Dipp, which was stayed pending the Cima settlement process. The Dahhan action was dismissed with prejudice in December 2022 after a $15 million settlement funded by insurance.
- Management concluded disclosure controls and procedures were effective at the reasonable-assurance level as of March 31, 2023; no material change in internal control over financial reporting was reported during the quarter.
Important facts for investors to verify
- Whether cash runway assumptions remain valid as clinical-trial spending and other operating costs evolve, and what financing is available given the baby-shelf restriction.
- Final and updated TPST-1120 trial results, including response confirmation, patient follow-up, and any PFS or OS data; assess the interim sample sizes and comparability of the groups.
- TPST-1495 clinical data and subsequent development plans, plus progress and funding needs for the TREX-1 program.
- Oxford loan covenant compliance, any conditions for extending the interest-only period, and the implications of the lien on company assets and intellectual property.
- Final court approval and financial terms of the Cima settlement, and subsequent status of Chiu v. Dipp.