Tempest Therapeutics(TPST) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements Presents unaudited condensed consolidated financial statements, detailing balance sheets, operations, equity, cash flows, and notes on accounting policies and liquidity Condensed Consolidated Balance Sheets The balance sheet shows significant reductions in cash, total assets, and equity, with liabilities decreasing due to loan repayment Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $14,280 | $30,268 | | Total current assets | $15,103 | $31,474 | | Total assets | $24,484 | $41,488 | | Liabilities & Equity | | | | Total current liabilities | $7,141 | $14,220 | | Total liabilities | $14,701 | $22,362 | | Total stockholders' equity | $9,783 | $19,126 | Condensed Consolidated Statements of Operations Q2 2025 net loss decreased to $7.9 million, while H1 2025 net loss increased to $18.7 million, driven by higher R&D expenses Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $3,871 | $5,837 | $11,498 | $10,177 | | General and administrative | $4,095 | $3,745 | $7,404 | $7,379 | | Loss from operations | $(7,966) | $(9,582) | $(18,902) | $(17,556) | | Net loss | $(7,870) | $(9,570) | $(18,730) | $(17,474) | | Net loss per share | $(2.07) | $(5.52) | $(5.17) | $(10.15) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity declined from $19.1 million to $9.8 million, driven by a $18.7 million net loss, partially offset by stock issuances - During the first six months of 2025, the company issued common stock and pre-funded warrants, raising cash to partially offset the net loss and fund operations[21] Condensed Consolidated Statements of Cash Flows Net cash used in operations increased to $16.5 million, with financing providing $0.5 million, leading to a $16.0 million net cash decrease for H1 2025 Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Cash used in operating activities | $(16,467) | $(12,696) | | Cash used in investing activities | $0 | $(417) | | Cash provided by financing activities | $479 | $5,007 | | Net decrease in cash | $(15,988) | $(8,106) | Notes to Condensed Consolidated Financial Statements Notes detail clinical-stage status, 1-for-13 reverse stock split, going concern doubt, strategic review, cost reductions, and financing activities - The company's financial statements were prepared on a going concern basis, but management has substantial doubt about its ability to continue operating for the next 12 months due to recurring losses and limited cash of $14.3 million as of June 30, 2025[32][33] - In April 2025, the company reduced its workforce by 21 of 26 full-time employees and transitioned its CEO, CMO, and CFO to consulting arrangements to reduce costs while exploring strategic alternatives[32] - On April 8, 2025, the company effected a 1-for-13 reverse stock split, with all share and per-share data in the financial statements retrospectively adjusted[29][30] - In June 2025, the company raised approximately $4.1 million in net proceeds from a registered direct offering of common stock and pre-funded warrants[37] - The company fully repaid its loan with Oxford Finance LLC in April 2025 with a payment of $3.5 million, which included a $0.6 million exit fee, terminating the agreement and releasing all liens[55] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses clinical programs, strategic review, going concern issues, operational results, and recent financing activities, highlighting financial condition Overview and Clinical Programs Tempest, a clinical-stage biotech, advances amezalpat for Phase 3 HCC and TPST-1495 for Phase 2 FAP, both with key regulatory designations - The lead program, amezalpat, is poised to begin a pivotal Phase 3 study for first-line hepatocellular carcinoma (HCC) after receiving positive feedback from the FDA and NMPA (China)[87][91][92] - The second clinical program, TPST-1495, is set to begin a Phase 2 trial in patients with Familial Adenomatous Polyposis (FAP) in 2025, with the trial being funded by the National Cancer Institute (NCI)[95] Going Concern and Strategic Review Substantial doubt exists about the company's going concern ability, with $14.3 million cash for less than 12 months, prompting a strategic review and workforce reduction - The company's existing cash of $14.3 million is projected to fund operations for less than 12 months, raising substantial doubt about its ability to continue as a going concern[97][101] - In April 2025, the company began exploring a full range of strategic alternatives and retained MTS Health Partners as a financial advisor[98] - To extend capital, the company implemented a Reduction in Force (RIF), cutting its workforce from 26 to 5 full-time employees, with key executives transitioning to consulting roles[100] Results of Operations Q2 2025 R&D decreased by 34% to $3.9 million, while H1 2025 R&D increased by 13% to $11.5 million, with Q2 G&A rising due to separation costs Comparison of Operating Expenses (in thousands) | Expense | Q2 2025 | Q2 2024 | Change | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Research & Development | $3,871 | $5,837 | -34% | $11,498 | $10,177 | +13% | | General & Administrative | $4,095 | $3,745 | +9% | $7,404 | $7,379 | 0% | - The decrease in Q2 2025 R&D spending was primarily due to pausing clinical activities while exploring strategic alternatives, while the increase in H1 2025 R&D was driven by costs for contract research and manufacturing in preparation for the amezalpat pivotal trial[112][119] Liquidity and Capital Resources The company holds $14.3 million cash with a $225.8 million deficit, raised $6.9 million in H1 2025, repaid a loan, and faces substantial doubt about its going concern ability - The company's operations have been financed by sales of common stock, convertible preferred stock, and debt, with cash and cash equivalents at $14.3 million as of June 30, 2025[123] - In H1 2025, the company raised $2.8 million from its ATM Program and approximately $4.1 million net from a Registered Direct Offering (RDO)[127][129] - The company repaid its $3.5 million loan with Oxford Finance in full in April 2025, terminating the agreement[125] Item 3. Quantitative and Qualitative Disclosures About Market Risk This disclosure is not required as the company qualifies as a smaller reporting company - Disclosure is not required for smaller reporting companies[145] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective at the reasonable assurance level[147] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[148] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings - The company is not currently involved in any material legal proceedings that would have a material adverse effect on its business or financial condition[150] Item 1A. Risk Factors This section outlines significant risks including going concern doubt, strategic review uncertainty, operating losses, clinical setbacks, regulatory hurdles, and stock price volatility Risks Related to Our Financial Position and Capital Needs Critical financial risks include substantial doubt about going concern, need for additional funding, uncertain strategic review outcomes, and a history of operating losses - There is substantial doubt about the company's ability to continue as a going concern, as its cash of $14.3 million as of June 30, 2025, is expected to fund operations for less than 12 months[155] - The process of evaluating strategic alternatives may not result in any transaction, and failure to complete one could cause a decline in the stock price[159][160] - The company has a history of operating losses, with an accumulated deficit of $225.8 million as of June 30, 2025, and expects to continue incurring losses[169] Risks Related to Our Business and Strategy Strategic risks include retaining skilled employees, potential disruptions from acquisitions, and limitations on utilizing net operating loss carryforwards due to ownership changes - The company's success is highly dependent on retaining senior management, and it faces intense competition for qualified personnel in the biotechnology field[172][173] - The company's ability to use its net operating loss (NOL) carryforwards to offset future taxable income may be limited under Section 382 of the Code due to past and potential future ownership changes[177] Risks Related to Product Development and Regulatory Approval Business success depends on development and regulatory approval of TPST-1495 and amezalpat, facing risks like trial replication, patient enrollment, side effects, and uncertain FDA approval - The company's ability to generate revenue depends heavily on the successful development and commercialization of its lead product candidates, TPST-1495 and amezalpat, which is uncertain[178] - Positive results in early-stage clinical trials may not be replicated in later, larger trials, which is a common risk in the biotechnology industry[184][186] - Potential difficulties in enrolling patients for clinical trials could cause delays and increase costs, potentially jeopardizing development programs[187][189] Risks Related to Commercialization and Manufacturing Commercial success is not guaranteed, facing risks from market acceptance, pricing uncertainty, reliance on third-party manufacturers, intense competition, and lack of sales infrastructure - Commercial success depends on market acceptance by providers, patients, and third-party payors, which is uncertain[217] - The company relies on third-party contract manufacturing organizations (CMOs) for its clinical supplies, which exposes it to risks of production delays, quality issues, and supply disruptions[226][233] - The biopharmaceutical industry is intensely competitive, and competitors may have greater financial and technical resources, potentially developing more effective therapies or achieving regulatory approval sooner[228][231] Risks Related to Government Regulation Operating in a highly regulated environment, the company faces risks from lengthy FDA approval, healthcare legislation impacts, evolving data privacy laws, and anti-kickback regulations - The FDA regulatory approval process is lengthy, time-consuming, and unpredictable, with a high potential for delays or failure[250] - Recent and future healthcare legislation, such as the Inflation Reduction Act (IRA), may increase pricing pressure and the difficulty of commercializing products[269][273] - The company is subject to numerous evolving data privacy and security laws in the U.S. and abroad (e.g., HIPAA, CCPA, GDPR), and non-compliance could lead to significant fines and reputational harm[281][282][286] Risks Related to Our Intellectual Property Success depends on obtaining and protecting intellectual property, facing risks from costly patenting, potential challenges, reliance on third-party licenses, infringement claims, and global IP enforcement - The company's commercial success depends on obtaining and maintaining strong patent protection, but the patenting process is expensive, time-consuming, and uncertain[316] - The company depends on intellectual property licensed from third parties, such as the Regents of the University of California, and could lose significant rights if these licenses are terminated or if disputes arise[318][319] - The company may face third-party claims of intellectual property infringement, which could be expensive to defend and could block the commercialization of its product candidates[339][341] Risks Related to Ownership of Our Common Stock and Other General Matters Stockholders face risks from high stock price volatility, reduced liquidity post-reverse split, thin trading, reduced disclosure as a smaller reporting company, and anti-takeover provisions - The market price of the company's common stock has been and is likely to continue to be highly volatile[371] - The 1-for-13 reverse stock split effective April 8, 2025, may reduce trading liquidity and there is no assurance it will maintain a higher stock price[376] - The company has a stockholder rights plan (a 'poison pill') and other anti-takeover provisions that could discourage or prevent an acquisition[392][395] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[402] Item 3. Defaults Upon Senior Securities This item is not applicable - Not applicable[403] Item 4. Mine Safety Disclosures This item is not applicable - Not applicable[404] Item 5. Other Information The company entered into success bonus agreements with key executives, contingent on a change in control before January 31, 2026, and amended the Corporate Controller's offer letter - The company entered into success bonus agreements with key executives, totaling $725,000 in aggregate, contingent upon a change in control occurring before January 31, 2026[84][405] Item 6. Exhibits This section lists all exhibits filed with or incorporated by reference into the Form 10-Q, including corporate governance documents, material agreements, and certifications