Tempest Therapeutics (NASDAQ: TPST) stock is up 3,800% on the full day. TPST stock has reacted to the company’s announcement that it’s drug for a certain type of liver cancer seems to actually work. OK, we might think that 3,800% is rather too much for just that announcement - this isn’t FDA approval and all that as yet. Just early stage test results. The explanation for the vast percentage rise is that the starting market capitalisation was around the $3 million mark. So the value add here is around $100 million and yes, a working liver cancer drug might well be worth that much and more.
The background at Tempest:”Tempest Therapeutics, Inc., a clinical-stage oncology company, develops small molecule therapeutics that combine both tumor-targeted and immune-mediated mechanisms to treat various tumors. The company’s two clinical programs are TPST-1495, a dual antagonist of EP2 and EP4, receptors of prostaglandin E2, which is in a Phase 1 trial to treat solid tumors; and TPST-1120, a selective antagonist of peroxisome proliferator-activated receptor alpha that is in a Phase 1 trial for the treatment of solid tumors.”
The particular announcement here: “new and updated positive results from the planned data analysis of an ongoing global randomized Phase 1b/2 clinical study in which TPST-1120, Tempest’s PPAR⍺ antagonist, shows clinical superiority in multiple study endpoints when combined with atezolizumab and bevacizumab in a randomized comparison to atezolizumab and bevacizumab in the first-line treatment of patients with unresectable or metastatic hepatocellular carcinoma (“HCC”).”
Tempest Therapeutics stock price from Google Finance
There’s no doubt that this is a good result But as we say the percentage rise in the TPST stock price is more to do with the very low starting point of the corporate valuation. We don’t say that $100 million is the right valuation here, not at all, but it’s a reasonable one. 3,800% up is because of that starting point at a $3 million market cap.
We’d also suggest there’s a high likelihood of a stock issuance here. From the last accounts they’ve around $17 million in cash and they lose $7 million a quarter. So, perhaps 6 month’s runway here but selling stock now, rather than two days ago, would clearly be very much less dilutive. We’d rather expect management to take this opportunity. That’s the one thing we see here putting a cap on the Tempest stock price.