Mizuho maintains Outperform on Terns Pharma, $14 target

On Tuesday, Mizuho (NYSE:MFG) Securities reiterated an Outperform rating on Terns Pharmaceuticals (NASDAQ:TERN) with a steady price target of $14.00, significantly above the current stock price of $2.31. The reassertion of the positive outlook followed the announcement by Pfizer (NYSE:PFE) on Monday regarding the discontinuation of its Phase 2 oral GLP-1 agonist, danuglipron, due to liver toxicity concerns. Terns Pharmaceuticals’ stock concluded Monday’s trading session with an 8% increase, outperforming the 3% gain seen by the XBI biotech index. According to InvestingPro data, the stock has shown significant momentum with a 12.68% return over the past week.

Mizuho’s analyst highlighted the significance of Pfizer’s withdrawal from the development of danuglipron, considering it a major benefit for Terns Pharmaceuticals. This development effectively eliminates a notable competitor from the field, as Terns is progressing with its own oral GLP-1 therapy, TERN-601. Anticipation is building for the Phase 2 data of TERN-601, which is expected to be released in the fourth quarter of 2025. With a strong current ratio of 23.14, InvestingPro data shows the company has ample liquidity to fund its development programs.

The analyst also suggested that the latest events could heighten the interest of strategic partners in Terns Pharmaceuticals’ obesity treatment portfolio, potentially including Pfizer itself. This increased interest is seen as a direct result of the removal of Pfizer’s competing drug from the market.

In the broader context, Mizuho underscored several reasons for maintaining the Outperform rating on Terns Pharmaceuticals. The firm pointed to the considerable undervaluation of the stock year-to-date, which has seen a 59% decline compared to the XBI’s 17% drop, amidst a volatile market. Additionally, the company’s fundamentals have not changed, and its drug candidates TERN-601 and TERN-701 are considered significantly de-risked. Furthermore, Terns Pharmaceuticals has a cash runway that extends to 2028, and it is expected to experience two data catalysts in the second half of 2025 that could potentially drive positive momentum for the stock.

In other recent news, Terns Pharmaceuticals has reported progress in its clinical trials, including updates on the CARDINAL study for TERN-701 and the upcoming FALCON trial for TERN-601. The company has completed the dose escalation phase for TERN-701, an oral treatment for chronic myeloid leukemia, and plans to begin the dose expansion phase in the second quarter of 2025. Terns Pharmaceuticals also announced the appointment of Andrew Gengos as its new Chief Financial Officer, bringing extensive experience in financial and corporate strategy to the company. In a related development, the former CFO, Mark Vignola, has transitioned to a consulting role, providing services through July 2025.

Additionally, Oppenheimer analysts have maintained an Outperform rating on Terns Pharmaceuticals, setting a $20 price target. They highlighted the promising data from the Phase 1 study of TERN-701, which showed efficacy and safety, and noted the upcoming Phase 2 study for TERN-601 in obesity treatment. The company’s financial position remains strong, with cash reserves expected to fund operations into 2028. Terns Pharmaceuticals plans to present at the TD Cowen 45th Annual Healthcare Conference in March 2025. These recent developments reflect the company’s ongoing efforts to advance its pipeline and strengthen its financial and strategic leadership.

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