Tempest Therapeutics, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. Tempest is a clinical-stage oncology company with no approved products and no product-sales revenue. Its programs include Phase 1 candidates TPST-1120 and TPST-1495, plus a preclinical TREX-1 program. TPST-1120 is also in a Roche-collaboration study.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | No product-sales revenue | No product-sales revenue |
| Research and development expense | $5.109 million | $3.592 million; up $1.517 million |
| General and administrative expense | $3.052 million | $1.535 million; up $1.517 million |
| Operating loss | $8.161 million | $5.127 million |
| Net loss | $8.491 million | $5.355 million |
| Net loss per share, basic and diluted | $1.18 | $10.55 |
| Cash used in operating activities | $7.107 million | $6.310 million |
| Cash and cash equivalents at quarter-end | $45.754 million | $51.829 million at December 31, 2021 |
The company reported no meaningful revenue or profit margin because it has not generated product revenue and remains loss-making. The lower loss per share versus 2021 reflects a substantially larger weighted-average share count; the company’s 2021 merger was accounted for as a reverse recapitalization, so the per-share comparison is not directly indicative of improved performance.
At March 31, 2022, total assets were $66.953 million, total liabilities $37.596 million, and stockholders’ equity $29.357 million. The balance sheet included a $15.0 million legal-settlement accrual matched by a $15.0 million insurance recovery asset. The loan payable, net of discount and issuance costs, was $15.133 million; it bears a floating rate stated as 7.15% and matures August 1, 2025. Cash, cash equivalents and restricted cash totaled $46.122 million in the cash-flow statement; $0.368 million was restricted for a lease security deposit.
Changes, outlook and key risks
- Operating expenses rose year over year. Management attributed R&D growth to expanded development efforts, higher consulting fees and compensation; G&A growth mainly reflected professional and consulting fees and public-company insurance and costs.
- Management said March 31 cash and access to the term loan were expected to fund requirements for at least 12 months. The company also stated it expects increasing losses and will need additional capital to execute its plans.
- On April 29, 2022, after quarter-end, the company completed a PIPE financing for approximately $15.0 million gross proceeds, before expenses, through common shares and pre-funded warrants. The financing adds capital but may dilute existing holders; resale registration was agreed.
- The company has no established profitability or product revenue. Clinical, regulatory, manufacturing, patient-enrollment, competition, financing and potential COVID-19-related disruptions could delay or prevent development and commercialization.
- Disclosure controls were reported ineffective at March 31, 2022 due to previously identified material weaknesses involving accounting resources and review/accrual of clinical-trial expenses. Management was pursuing remediation; completion was not assured.
- The $15.0 million Dahhan securities class-action settlement was preliminarily approved after quarter-end and remained subject to final approval; the filing states insurance is expected to fund it entirely. The company could not estimate potential losses, if any, in two other legacy shareholder matters.
- The company entered into an eight-year Brisbane office lease scheduled to commence in October 2022; the related $0.368 million restricted deposit was recorded in other noncurrent assets.
Investor verification priorities
- Confirm current cash runway and expected spending against clinical-development plans, including the effect of the April PIPE and any offering costs or subsequent capital activity.
- Track clinical progress, trial enrollment, safety and efficacy data for TPST-1120 and TPST-1495, and milestones in the TREX-1 program and Roche collaboration.
- Review the loan’s terms, borrowing availability and repayment obligations, as well as future funding needs and potential dilution from equity or warrant issuance.
- Verify remediation of the material weaknesses and whether clinical-trial accruals and reporting controls are operating effectively.
- Follow final court approval and insurance funding of the Dahhan settlement, and developments in the other disclosed legal proceedings.