Millendo To Merge With Tempest Therapeutics; Shares Tank

Millendo Therapeutics has agreed to merge with South San Francisco-based Tempest Therapeutics, a privately-held clinical-stage oncology company, in an all-stock deal. Shares of the biopharmaceutical company dropped more than 5% in the pre-market session after closing 36.7% lower on March 29.

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The combined entity is likely to focus on developing Tempest’s oncology pipeline of small molecule therapeutics, which could potentially address a wide range of tumors. To support the merger, Tempest has secured commitments from a premier group of healthcare investors for a $30 million PIPE financing, which is likely to close along with the completion of the merger.

Upon closure of the deal, Millendo (MLND) will be renamed Tempest Therapeutics, Inc. and will be headquartered in South San Francisco. Furthermore, the stock will trade on the Nasdaq Capital Market under the ticker symbol TPST.

Additionally, the cash expected from both companies, the net proceeds of the merger, and financing are anticipated to fund the further development of Tempest’s three oncology programs and the company’s operations into early 2023, the company said.

The transaction, which awaits shareholders’ approval for both companies, the completion of the PIPE financing, and certain regulatory approvals, is likely to close in the first half of this year.

When the transaction is finalized, existing Millendo shareholders are anticipated to own 18.5% of the combined entity, while the remaining 81.5% will be owned by pre-merger Tempest stockholders. (See Millendo stock analysis on TipRanks)

Millendo CEO Louis Arcudi said, “Millendo Therapeutics’ strategic review was a thorough and thoughtful process. We believe we have found a partner that offers not only the greatest value for our existing shareholders but also promising targeted oncology product candidates for patients living with cancer.”

Recently, Ladenburg Thalmann analyst Matthew Kaplan downgraded the stock to Hold from Buy.

The rest of the Street is sidelined on the stock with a Hold consensus rating, based on 2 Holds. The average analyst price target of $2 implies 45% upside potential to current levels.