Executive Summary / Key Takeaways

• Tempest Therapeutics is a clinical-stage oncology biotech at a critical juncture, holding promising Phase 2 data for its lead candidate, amezalpat (TPST-1120), in first-line liver cancer, but facing significant financial constraints.
• Amezalpat, a first-in-class PPARα antagonist, demonstrated a compelling six-month improvement in median overall survival (HR 0.65) in combination with standard of care in a randomized Phase 2 study, receiving positive FDA feedback for a pivotal Phase 3 design and key regulatory designations (FDA/EMA ODD, FDA FTD).
• The company's financial position is precarious, with only $21.5 million in cash as of March 31, 2025, and a going concern warning, necessitating a strategic review process to explore options like partnerships, mergers, or acquisitions.
• A recent corporate restructuring, including a significant workforce reduction, and the repayment of debt aim to extend the limited cash runway while strategic options are evaluated.
• The investment thesis hinges on the successful outcome of the strategic review, which could unlock value from the promising pipeline, particularly amezalpat, but failure to secure a transaction could lead to a wind-down of operations.

Setting the Stage: Tempest's Oncology Ambition and Differentiated Science

Tempest Therapeutics is a clinical-stage biotechnology company dedicated to discovering and developing small molecule drugs with the potential to be first-in-class treatments for a range of cancers. The company's journey has evolved, notably through its merger with Millendo Therapeutics, to focus on building a diverse portfolio targeting both tumor cells directly and the tumor microenvironment to enhance immune responses. This strategy is rooted in the belief that modulating specific pathways can offer significant advantages over existing therapies.

At the heart of Tempest's approach lies its differentiated technology platform, yielding candidates like amezalpat (TPST-1120) and TPST-1495. Amezalpat is an oral, small molecule designed as a selective antagonist of peroxisome proliferator-activated receptor alpha (PPARα). This target is implicated in regulating lipid metabolism and inflammation within the tumor microenvironment, influencing both cancer cell growth and immune cell function. The strategic intent behind amezalpat is to disrupt these processes, making tumors more susceptible to immune attack and potentially overcoming resistance mechanisms. The tangible benefit of this approach was highlighted in the randomized Phase 1b/2 study in first-line unresectable or metastatic hepatocellular carcinoma (HCC), where amezalpat, combined with atezolizumab and bevacizumab, delivered a six-month improvement in median overall survival (OS) with a hazard ratio (HR) of 0.65 compared to the standard of care alone. This survival benefit was notably preserved across key subpopulations, including patients with PD-L1 negative and β-catenin mutated disease, aligning with the proposed dual mechanism of action. This clinical outcome provides a quantifiable performance metric suggesting a meaningful advantage.

The second key candidate, TPST-1495, is a novel, small-molecule dual antagonist of the EP2 and EP4 receptors of prostaglandin E2 (PGE2). The PGE2 pathway is known to suppress anti-tumor immunity and promote tumor growth. By inhibiting both EP2 and EP4 receptors, TPST-1495 aims for a more comprehensive blockade of this immunosuppressive pathway. While earlier in development, preclinical data in a relevant mouse model for Familial Adenomatous Polyposis (FAP) supports the mechanistic rationale for exploring this candidate in a Phase 2 study for this rare genetic disorder that significantly increases gastrointestinal cancer risk.

These technological differentiators are critical to Tempest's competitive positioning. The oncology landscape is intensely competitive, populated by large pharmaceutical companies and established biotechs like Exelixis (EXEL), Gilead Sciences (GILD), Merck (MRK), and Bristol-Myers Squibb (BMY). These larger players possess vast resources, extensive pipelines, and established commercial infrastructures. While TPST's financial metrics (e.g., negative margins, limited cash) are significantly weaker than these profitable giants, its strength lies in potentially first-in-class mechanisms targeting novel pathways. Amezalpat's positive OS data in HCC offers a potential edge over competitors like EXEL's cabozantinib or immune checkpoint inhibitors from MRK (Keytruda) and BMY (Opdivo) by potentially enhancing the efficacy of existing standard-of-care combinations through a distinct mechanism. The FDA's granting of Orphan Drug Designation (ODD) and Fast Track Designation (FTD) for amezalpat in HCC, and FDA ODD for TPST-1495 in FAP, underscores the regulatory recognition of the potential to address unmet needs, providing potential advantages in development and review timelines compared to competitors navigating standard pathways. However, TPST's limited scale and financial resources represent significant vulnerabilities against the deep pockets and broad market presence of its rivals.

Recent Performance and The Stark Financial Reality

Despite the scientific promise and clinical validation suggested by the amezalpat data, Tempest's financial performance reflects its status as a pre-revenue, clinical-stage company. The Condensed Consolidated Statements of Operations for the three months ended March 31, 2025, highlight the ongoing investment in research and development necessary to advance its pipeline.

Operating expenses totaled $10.9 million for Q1 2025, an increase from $8.0 million in Q1 2024. This was primarily driven by a significant 76% increase in Research and Development expenses, rising from $4.3 million in Q1 2024 to $7.6 million in Q1 2025. This surge was directly attributable to increased costs from engaging contract research and manufacturing organizations in preparation for the planned pivotal Phase 3 trial for amezalpat in first-line HCC.

General and administrative expenses saw a slight decrease, from $3.6 million to $3.3 million, mainly due to reduced consulting services.

The result of these expenditures, without corresponding product revenue, is continued operating losses. The net loss for the three months ended March 31, 2025, was $10.9 million, compared to $7.9 million for the same period in 2024. Cumulatively, the company has incurred substantial losses since inception, resulting in an accumulated deficit of $218.0 million as of March 31, 2025.

This financial trajectory has led to a critical liquidity situation. As of March 31, 2025, Tempest held $21.5 million in cash and cash equivalents. The company explicitly states that its "existing cash and cash equivalents plus the net proceeds of $1.2 million from the Company's ATM Program as described below will fund the Company's projected operating expense requirements through less than 12 months from the date our consolidated financial statements were available to be issued" (May 13, 2025). This limited cash runway, coupled with the history of operating losses and accumulated deficit, raises substantial doubt about the Company's ability to continue to operate as a going concern.

In response to this pressing financial reality and market conditions, Tempest has taken steps to preserve capital. A significant corporate restructuring was implemented in April 2025, involving a reduction of 21 out of 26 full-time employees. This action is estimated to result in approximately $1.5 million of cash expenditures, primarily for severance and benefits, with the majority expected in Q2 2025. Additionally, the company repaid the remaining $3.5 million under its loan agreement with Oxford Finance LLC in April 2025, using cash on hand, which included a $0.6 million exit fee. While these measures extend the runway, the fundamental need for significant additional funding remains. The company also has an At-the-Market (ATM) program, with $11.8 million remaining available as of April 30, 2025, though its ability to raise capital through this mechanism is limited by the "baby shelf rules" due to its public float size.

Strategic Crossroads and The Path Forward

Facing this acute funding challenge, Tempest has formally announced a plan to explore a full range of strategic alternatives. This process, for which MTS Health Partners, L.P. has been retained as a financial advisor, is aimed at advancing the promising clinical-stage programs and maximizing stockholder value. Potential outcomes include mergers, acquisitions, partnerships, joint ventures, or licensing arrangements.

The strategic review is directly tied to the potential of Tempest's pipeline, particularly amezalpat. The positive Phase 2 data has paved the way for a planned pivotal Phase 3 study in first-line HCC. The FDA provided positive feedback on the proposed Phase 3 design, which closely mirrors the successful Phase 2 study, utilizing the same dose and schedule in combination with atezolizumab and bevacizumab, with OS as the primary endpoint. Crucially, the FDA agreed to a pre-specified early efficacy analysis, which could potentially reduce the time to primary read-out by up to eight months. The receipt of the FDA's "Study May Proceed" letter in November 2024, followed by FDA ODD and FTD in early 2025, and EMA ODD in June 2025, underscore the regulatory alignment and perceived potential of amezalpat. Advancing this program into a pivotal trial is a key potential future milestone, contingent on securing the necessary resources through the strategic review.

Concurrently, the TPST-1495 program is poised to enter a Phase 2 study in FAP in 2025, supported by NCI funding through the CP-CTNet, which received the FDA's "Study May Proceed" letter in March 2025. The FDA also granted ODD for TPST-1495 in FAP in April 2025. This NCI-funded trial represents a capital-efficient path forward for this candidate, exploring its potential in a rare disease setting.

The strategic review process is the central focus for investors. A successful transaction, such as a partnership or acquisition, could provide the necessary funding and resources to fully realize the potential of amezalpat and TPST-1495, potentially accelerating development and commercialization. Given that Tempest currently owns all rights to its programs, there is flexibility in how such a transaction could be structured. However, the outcome is uncertain; there is no guarantee that a strategic alternative will be completed on favorable terms, or at all.

Key Risks and Challenges

The path forward for Tempest is fraught with significant risks, most notably the substantial doubt regarding its ability to continue as a going concern. The limited cash runway means that failure to secure additional funding or a strategic transaction could force the company to wind down operations, potentially resulting in a total loss of investment for stockholders.

The strategic review process itself carries risk. It is time-consuming and costly, and there is no assurance it will yield a transaction that maximizes or even enhances stockholder value. Even if a transaction occurs, integration challenges or failure to achieve anticipated benefits could negatively impact the business.

Clinical development remains inherently uncertain. While amezalpat's Phase 2 data is promising, success in earlier trials does not guarantee success in a larger, pivotal Phase 3 study. Delays in patient enrollment, unexpected safety issues, or failure to meet the primary endpoint could derail the program. Reliance on third parties for manufacturing and clinical trial execution adds complexity and reduces direct control, potentially leading to delays or quality issues.

The competitive landscape poses a constant threat. Larger, better-funded competitors could advance their own pipelines, develop more effective therapies, or gain regulatory approval faster, diminishing the market opportunity for Tempest's candidates. TPST's limited resources make it challenging to compete head-to-head with these giants in large indications.

Intellectual property risks, including the difficulty and cost of obtaining and enforcing patents and the potential for third-party infringement claims, could also jeopardize the company's ability to protect its technology and commercialize its products.

Furthermore, the company's stock price has been highly volatile, influenced by clinical data, regulatory news, and broader market conditions. The recent reverse stock split, while addressing Nasdaq compliance, may also impact liquidity.

Unstable macroeconomic conditions and geopolitical tensions can exacerbate financial and operational risks.

Conclusion

Tempest Therapeutics stands at a critical inflection point, possessing potentially transformative clinical data for amezalpat in liver cancer and a promising second program in TPST-1495, yet facing an urgent need for capital. The positive Phase 2 amezalpat results, coupled with favorable regulatory designations and feedback on the pivotal Phase 3 design, provide a compelling foundation for the ongoing strategic review. This process represents the primary catalyst for unlocking value, offering potential pathways to secure the funding and expertise required to advance these programs towards potential commercialization.

For investors, the core thesis centers on the outcome of this strategic evaluation. Success could lead to a partnership or acquisition that validates the pipeline's potential and provides significant upside. However, the substantial doubt about the company's ability to continue as a going concern underscores the binary nature of the current situation. Monitoring the progress of the strategic review, any updates on the initiation of the amezalpat pivotal trial and the TPST-1495 Phase 2 study, and the company's cash position will be paramount in assessing the risk-reward profile of this high-stakes oncology play.