Tempest Therapeutics, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The company completed its merger with Millendo Therapeutics on June 25, 2021; it was accounted for as a reverse recapitalization, with Tempest as the accounting acquirer. Accordingly, reported 2020 results are Tempest’s historical results and are not a like-for-like comparison with the combined company’s full 2021 period.
Business context
Tempest is a clinical-stage oncology company with no approved products and no product-sales revenue. Its lead candidates are TPST-1120, a PPARα antagonist, and TPST-1495, a dual EP2/EP4 antagonist, both in Phase 1 studies. TPST-1120 is also being evaluated with Roche in a randomized Phase 1b/2 study in first-line advanced or metastatic hepatocellular carcinoma. The company was also advancing a preclinical TREX-1 inhibitor program and a separately licensed, undisclosed-target program.
Financial and operating results
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $17.2 million | $14.4 million |
| General and administrative expense | $9.8 million | $4.9 million |
| Operating loss | $27.0 million | $19.3 million |
| Interest expense | $1.3 million | None reported |
| Net loss | $28.3 million | $19.2 million |
| Net loss per share, basic and diluted | $7.47 | $41.03 |
| Cash used in operating activities | $26.0 million | $19.0 million |
| Cash and cash equivalents at year-end | $51.8 million | $18.8 million |
Margins are not meaningful because Tempest had no product-sales revenue. At December 31, 2021, total assets were $73.2 million, including a $15.0 million insurance recovery receivable related to a legal settlement. Total liabilities were $37.1 million, including a $15.0 million settlement accrual, $15.1 million of loan payable net of discounts and issuance costs, and $3.5 million of operating lease liabilities. Stockholders’ equity was $36.1 million. The company reported an accumulated deficit of $100.1 million.
Financing cash flow was $59.1 million, including $15.0 million of Oxford loan proceeds, $33.4 million of net common-stock proceeds, and approximately $17.0 million of cash acquired in the merger, partly offset by $6.4 million of merger transaction costs. The figures reflect multiple financing and merger transactions, not recurring operating cash generation.
Changes versus the prior comparable period
- Net loss increased by $9.1 million, while operating cash use increased by $6.9 million.
- R&D expense rose $2.8 million, primarily due to expanded development work, consulting, and compensation. G&A expense rose $4.9 million, principally due to higher compensation and merger-related audit and tax services.
- Cash increased by $33.0 million year over year, supported by financing and cash received in the Millendo merger; the company also began incurring Oxford loan interest.
- In July 2021, Tempest established a $100 million at-the-market equity sales program. It had sold 248,160 shares for approximately $3.7 million in net proceeds by year-end.
Outlook, risks, and unusual items
- Management expected expenses and operating losses to rise as clinical and preclinical programs advance. It stated that year-end cash and access to its term loan were expected to fund requirements for at least 12 months, while also stating that additional capital would be needed to continue development and that financing may not be available on acceptable terms.
- Oxford’s $35 million loan commitment included $15 million funded in January 2021, a $10 million Tranche B subject to specified financing and development milestones, and a further $10 million Tranche C at the lender’s option. The loan matures August 1, 2025, carries a floating 7.15% annual rate as described in the filing, and scheduled monthly principal payments begin March 2023.
- Management anticipated TPST-1120 Phase 1 monotherapy and combination data in mid-2022 and initial response-rate data from the Roche study’s first 40 patients in the TPST-1120 arm by year-end 2022. For TPST-1495, it expected dose and schedule optimization response data by year-end 2022 or early 2023. These are projections, not reported outcomes.
- Management described preliminary clinical observations for TPST-1120, including tumor shrinkage or prolonged disease control in some patients and a reported partial response in one late-line kidney cancer patient receiving TPST-1120 with nivolumab. These early observations do not establish efficacy; the filing cautions that interim data can change and early-stage results may not predict later trials.
- Key risks include clinical and regulatory failure or delay, patient enrollment and COVID-19 disruption, dependence on third-party manufacturers and research providers, need for additional capital, competition, and intellectual-property uncertainty.
- Disclosure controls were assessed as ineffective at December 31, 2021 because of material weaknesses involving insufficient financial-control resources and controls over clinical-trial expense accruals. Management planned remediation and expected to complete it in the first half of 2022; completion is not established by this filing.
- A $15 million proposed settlement in a legacy shareholder class action was recorded with an equal insurance recovery receivable. The settlement remained subject to preliminary and final court approval; defendants denied liability. Two other legacy shareholder matters remained outstanding, with potential losses not estimable.
- The 2021 financial statements received an unqualified audit opinion. The auditor identified accrued R&D expenses as a critical audit matter; the reported year-end accrued clinical-trial liability was $0.8 million.
Important facts for investors to verify
- Whether the clinical milestones and data timelines for TPST-1120 and TPST-1495 were achieved, and how complete, durable, and independently verifiable the reported early observations are.
- Current cash, operating cash burn, financing needs, and whether any additional Oxford loan tranches became available or were drawn.
- Whether the $15 million settlement received court approval and whether the insurance recovery was collected in full.
- Whether management remediated the material weaknesses and whether subsequent filings report effective controls.
- Potential dilution from the ATM program, equity compensation, and other financing; the filing reports 7,173,094 common shares outstanding as of March 15, 2022.
- Potential limits on the use of tax-loss carryforwards following ownership changes, including the merger.