Tempest Therapeutics (NASDAQ: TPST) stock is back up 86%. This follows the 3,800% rise last week in TPST stock, the then 60% fall and so on. The volatility is as the market struggles to come to terms with - to price correctly - the recent test results. But what’s almost certainly true is that the extreme volatility stems from the gross undervaluation at the start. The percentage changes look vast - are vast - but the actual change in market capitalisation, when expressed in dollars, looks less startling.
The background at Tempest Therapeutics: 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.”
This led to a market capitalisation of $3 million. Which was substantially below cash value, let alone any option value on the results of the research. But that research then showed value: “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
As we can see, the price fell back substantially and is now rising again. It’s difficult to value something at this stage of the testing and approval game. But clearly something that might actually work - with decent test results - is worth something, not that negative value as against the cash balance.
As Fortune puts it: “Tempest was “coming from an almost unfathomably low valuation going into this data readout,” as investors were skeptical following earlier study results, according to William Blair analyst Matt Phipps. “The company is still clearly undervalued for the blockbuster opportunity” of its cancer drug, he wrote in a note dated Wednesday.”
Well, whether it’s still undervalued is a matter of opinion. But that it was undervalued at that $3 million starting point seems inescapable.
We do still think that a likely future includes a fund raise through stock issuance. Even the assumption that this will happen could provide a cap on the Tempest stock price. We don’t know there will be more TPST stock issued but it’s the sensible thing for management to do - therefore we assume they’ll do it.
