Terns Pharmaceuticals’ SWOT analysis: promising CML and obesity drugs drive stock outlook

Terns Pharmaceuticals, Inc. (NASDAQ:TERN) is a clinical-stage biopharmaceutical company focused on developing small molecule treatments for non-alcoholic steatohepatitis (NASH), chronic myeloid leukemia (CML), and obesity. With a market capitalization of $647 million and a notably low beta of -0.05, the stock shows limited correlation with broader market movements. The company’s stock has garnered significant attention from analysts due to its promising pipeline, particularly its lead candidates TERN-701 for CML and TERN-601 for obesity. As Terns approaches critical data readouts in the coming months, investors are closely watching the company’s progress and potential market impact. InvestingPro analysis indicates that 3 analysts have recently revised their earnings expectations upward for the upcoming period.

TERN-701: A Potential Game-Changer in CML Treatment

Terns Pharmaceuticals’ TERN-701 is an oral BCR-ABL tyrosine kinase inhibitor (TKI) designed to treat CML. The drug has shown promising results in early-stage trials, with analysts noting its potential advantages over existing treatments.

The Phase 1 CARDINAL trial for TERN-701 has completed dose escalation, with expansion set to begin in the second quarter of 2025. Analysts are particularly interested in the upcoming data readout expected in the fourth quarter of 2025, which could provide crucial insights into the drug’s efficacy and safety profile.

TERN-701 has demonstrated high target selectivity, potency, and better in vivo target coverage compared to asciminib, a current treatment option. The CARDINAL study includes a more refractory patient population than those in asciminib studies, with some patients even refractory to asciminib itself. This could potentially highlight TERN-701’s differentiation and efficacy in treating difficult cases.

Analysts believe that TERN-701 has the potential to capture significant market share in the second-line (2L) and third-line (3L+) markets for allosteric TKIs. The drug’s ability to become a preferred rescue option for patients who have failed previous treatments could drive its adoption and commercial success.

TERN-601: Targeting the Lucrative Obesity Market

Terns Pharmaceuticals is also making strides in the obesity treatment space with TERN-601, an oral glucagon-like peptide-1 receptor agonist (GLP-1RA). The company has completed enrollment for its Phase 2 FALCON trial, focusing on obesity treatment with TERN-601, with top-line data expected in early fourth quarter 2025.

The obesity treatment market has seen significant interest and investment in recent years, with continuous GLP-1 transactions indicating strong market value. Analysts note that competitive Phase 2 data could position TERN’s asset among market leaders in this space.

TERN-601’s distinct chemical structure from other oral GLP-1RAs, such as Pfizer’s discontinued danuglipron, may offer advantages in terms of safety and efficacy. The drug has shown mean liver enzyme reduction across 28 patients in early studies, suggesting a potentially limited toxicity concern compared to some competitors.

The success of other oral GLP-1RAs, such as Eli Lilly’s orforglipron in Phase 3 trials for diabetes, could signal broader acceptance and market share potential for oral treatments in this class. This trend bodes well for TERN-601’s prospects, assuming positive clinical outcomes.

Financial Position and Market Performance

Terns Pharmaceuticals reported a strong cash position of $315 million as of the most recent financial update, which is expected to provide a financial runway into 2028. This substantial cash reserve allows the company to fund its ongoing clinical trials and operations without immediate financing concerns. According to InvestingPro data, the company maintains an impressive current ratio of 24.7 and holds more cash than debt on its balance sheet, demonstrating robust financial health with an overall score of "GOOD" (2.59/5).

The company’s stock has shown significant volatility, with periods of outperformance compared to broader biotech indices. Analysts note that TERN shares increased by 108.2% since the close of the first quarter of 2025, outperforming the XBI (+2.9%) and are now +10% year-to-date as of August 2025.

Operating expenses for Terns Pharmaceuticals stood at $27.4 million in the most recent quarter, reflecting the company’s investment in research and development activities. As a clinical-stage biopharmaceutical company, Terns is not yet generating revenue, with continued losses expected through at least 2026.

Future Outlook and Upcoming Catalysts

Investors and analysts are keenly awaiting several key events that could significantly impact Terns Pharmaceuticals’ stock performance and overall outlook:

1. Phase 1 CARDINAL trial data for TERN-701 in CML, expected in the fourth quarter of 2025.

2. Top-line data from the Phase 2 FALCON trial for TERN-601 in obesity, anticipated in early fourth quarter 2025.

3. Potential partnership announcements, particularly for TERN-601 following the Phase 2 data release.

Analysts suggest that positive outcomes from these trials could de-risk the company’s shares and set the stage for advanced clinical development. The multi-asset company structure of Terns Pharmaceuticals could offer more partnering options beyond an outright acquisition due to its diverse portfolio in the obesity and CML spaces.

Bear Case

How might competition in the CML and obesity markets affect TERN’s prospects?

The CML and obesity treatment markets are highly competitive, with several established players and emerging therapies. In the CML space, TERN-701 will need to demonstrate clear superiority or differentiation from existing treatments, including asciminib, to gain significant market share. The drug’s efficacy in refractory patients will be crucial for its success.

In the obesity market, TERN-601 faces competition from both injectable and oral GLP-1RAs. Established players like Novo Nordisk and Eli Lilly have already captured significant market share with their injectable products. The success of other oral GLP-1RAs, such as Eli Lilly’s orforglipron, could create a crowded market for TERN-601, potentially limiting its growth potential.

What risks does TERN face in its clinical trials and regulatory approvals?

As with all clinical-stage biopharmaceutical companies, Terns Pharmaceuticals faces significant risks related to the outcomes of its clinical trials. Negative or underwhelming results from the CARDINAL or FALCON trials could severely impact the company’s stock price and future prospects. Additionally, even if trial results are positive, there is no guarantee of regulatory approval.

The company’s focus on novel mechanisms of action, while potentially advantageous, also carries inherent risks. Regulatory agencies may require additional studies or data to ensure the safety and efficacy of these new treatments, potentially delaying approval or increasing development costs.

Bull Case

How could positive trial results impact TERN’s market position?

Positive results from the CARDINAL trial for TERN-701 could position the drug as a preferred treatment option for CML patients, particularly those who have failed previous therapies. If the drug demonstrates superior efficacy or a better safety profile compared to existing treatments, it could capture a significant portion of the 2L and 3L+ markets for CML treatment.

For TERN-601, favorable outcomes in the FALCON trial could establish the drug as a leading oral option in the rapidly growing obesity treatment market. Given the high demand for effective and convenient weight loss treatments, a successful oral GLP-1RA could achieve substantial market penetration and drive significant revenue growth for Terns Pharmaceuticals.

What potential does TERN have for partnerships or acquisitions?

Terns Pharmaceuticals’ diverse pipeline and focus on high-value indications make it an attractive candidate for partnerships or potential acquisition. Positive data from either the CARDINAL or FALCON trials could spark interest from larger pharmaceutical companies looking to expand their presence in the CML or obesity markets.

The company’s strong cash position provides flexibility in negotiating potential deals, allowing it to pursue partnerships that maximize the value of its assets. A strategic partnership could provide additional resources for late-stage clinical development and commercialization, potentially accelerating the path to market for TERN-701 and TERN-601.

SWOT Analysis

Strengths:

• Strong cash position with runway into 2028
• Promising early-stage data for TERN-701 and TERN-601
• Diverse pipeline addressing high-value indications
• Potential for differentiation in both CML and obesity markets

Weaknesses:

• No revenue generation yet, with continued losses expected
• High dependence on clinical trial outcomes
• Limited commercial experience as a clinical-stage company

Opportunities:

• Large market potential in CML and obesity treatments
• Increasing demand for oral GLP-1RAs in obesity management
• Possible partnerships or acquisitions to accelerate growth
• Potential for expanded indications or combination therapies

Threats:

• Competition from established and emerging treatments in both CML and obesity markets
• Regulatory risks associated with novel mechanisms of action
• Potential for negative clinical trial results or safety concerns
• Market saturation in the obesity treatment space

Analysts Targets

• BMO Capital Markets: $15.00 (September 4th, 2025)
• JMP Securities: $20.00 (August 6th, 2025)

This analysis is based on information available up to September 18, 2025.

InvestingPro: Smarter Decisions, Better Returns

Gain an edge in your investment decisions with InvestingPro’s in-depth analysis and exclusive insights on TERN. Our Pro platform offers fair value estimates, performance predictions, and risk assessments, along with additional tips and expert analysis. Explore TERN’s full potential at InvestingPro.

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