Tempest Therapeutics, Inc. annual report, FY2023

Business context and reporting period

Tempest Therapeutics, Inc. filed this Form 10-K for the fiscal year ended December 31, 2023; it is an annual report, not a stand-alone fourth-quarter report. Tempest is a clinical-stage oncology biotechnology company with no approved products and no product-sale revenue. Its lead programs are TPST-1120, a PPARα antagonist, and TPST-1495, a dual EP2/EP4 antagonist.

Financial performance and liquidity

There is no meaningful product-sales margin to report. Net loss narrowed year over year as operating expenses declined; research and development expense fell 22%, mainly due to lower contract research and vendor costs. Financing activities provided $35.6 million in 2023, primarily from common-stock sales through the at-the-market program. The company had an accumulated deficit of $165.3 million.

At December 31, 2023, current assets were $40.4 million and current liabilities were $9.4 million. Loan payable totaled approximately $10.5 million net of discounts and issuance costs; the loan is secured by company assets, including intellectual property. The term loan matures August 1, 2025, bears a floating annual rate reported as 7.15%, and monthly principal payments of approximately $733,000 are scheduled to begin July 1, 2024. The company reported $9.4 million of material cash requirements payable within 12 months, including debt, lease, trade payable and accrued obligations.

Material changes and development updates

• TPST-1120: In a randomized Phase 1b/2 first-line HCC study, the company reported confirmed objective response rates of 30% in the TPST-1120 plus atezolizumab/bevacizumab arm (40 patients) and 13.3% in the standard-of-care control arm (30 patients). Median follow-up was 9.2 and 9.9 months, respectively. The company also reported favorable progression-free and overall-survival hazard ratios but did not provide the numerical values in this filing. Updated overall-survival data were expected in 2024.
• Within the TPST-1120 arm, the filing reports a 43% confirmed response rate and 100% disease-control rate among patients with activating β-catenin mutations, and a 27% response rate in PD-L1-negative tumors versus 7% in the control arm. These are small-subgroup findings and do not establish pivotal-trial efficacy.
• Management planned to meet with the FDA in 2024 regarding a potential pivotal Phase 3 study in first-line HCC, subject to FDA feedback. Further development in kidney and other cancers was also under consideration.
• TPST-1495: Phase 1 data presented in 2023 included tumor shrinkage, prolonged stable disease and a confirmed partial response in a patient with microsatellite-stable colorectal cancer. The company planned to report data from an endometrial-cancer combination arm in 2024 and, subject to final consortium approval, start an NCI-funded Phase 2 study in familial adenomatous polyposis.

Outlook, risks and unusual items

Management stated that year-end cash and cash equivalents were expected to fund current operating plans for at least 12 months from issuance of the financial statements. The company nevertheless expects continued losses and says it will need substantial additional capital to develop its candidates. Its runway estimate depends on assumptions about trial costs, timing and progress and does not include potential spending on strategic transactions. Additional equity financing could dilute shareholders; debt or partnership financing could restrict operations or require relinquishing rights.

• Clinical results are preliminary relative to pivotal development; early-stage outcomes may not be replicated, and FDA may require additional work before a Phase 3 trial.
• Oxford Finance has a lien on company assets, including intellectual property, and the loan agreement includes restrictive covenants and default provisions.
• Tempest relies on third parties for clinical research and manufacturing and has no commercial sales or distribution infrastructure.
• The company reported that it achieved Nasdaq’s minimum-bid-price compliance within the stated 180-day period, while warning that continued compliance is not assured. Its common stock has been volatile and is described as thinly traded.
• A stockholder rights plan adopted in October 2023 is scheduled to expire October 10, 2024, or October 10, 2026 if approved by stockholders, unless earlier redeemed or exchanged.
• The company reported no current material legal proceedings. Prior litigation inherited through Millendo was settled or dismissed in 2023. Management concluded disclosure controls and internal control over financial reporting were effective at year-end; the auditor did not attest to internal-control effectiveness because Tempest is a smaller reporting company.

Important facts for investors to verify

• Review subsequent TPST-1120 survival data, full trial results and FDA feedback on the proposed pivotal-study design.
• Confirm whether the TPST-1495 endometrial data and proposed FAP Phase 2 study proceeded as planned and what regulatory or consortium approvals were obtained.
• Assess cash burn against the stated 12-month runway, financing needs and any subsequent equity issuance, including dilution and remaining ATM capacity.
• Review Oxford loan repayment terms, covenant compliance and the impact of principal payments beginning July 2024.
• Check the status of the rights plan, Nasdaq listing compliance and the company’s share count; the filing reports 22,045,255 shares outstanding at year-end and 22,192,026 as of March 13, 2024.