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Terns Pharmaceuticals , Inc. (NASDAQ:TERN), with a market capitalization of $341.6 million, is a biopharmaceutical company focused on developing innovative therapeutic solutions for chronic liver diseases and cancer. The company’s stock has garnered significant attention from analysts due to its promising pipeline, particularly its lead candidates TERN-701 for chronic myeloid leukemia (CML) and TERN-601 for obesity. According to InvestingPro data, analysts maintain a strong buy consensus with price targets ranging from $14 to $34. This comprehensive analysis examines Terns Pharmaceuticals’ current position, future prospects, and the challenges it faces in the competitive pharmaceutical landscape.
Company Overview and Pipeline
Terns Pharmaceuticals has positioned itself as a potential disruptor in the treatment of CML and obesity, two areas with significant unmet medical needs. The company’s lead candidate, TERN-701, is an oral BCR-ABL tyrosine kinase inhibitor (TKI) for the treatment of CML. TERN-701 has shown encouraging efficacy trends and a favorable safety profile in early clinical trials, particularly for patients who are refractory to current treatments or intolerant to existing TKIs.
The company’s second key asset, TERN-601, is an oral glucagon-like peptide-1 receptor agonist (GLP-1RA) being developed for obesity. With the growing interest in GLP-1RAs for weight management, TERN-601 represents a significant opportunity for Terns in the rapidly expanding obesity treatment market.
TERN-701: A Promising CML Treatment
TERN-701 has demonstrated notable efficacy in early clinical trials. In the CARDINAL study, which enrolled heavily pre-treated patients with relapsed or refractory CML, TERN-701 showed a 50% cumulative major molecular response (MMR) rate in non-T315I patients at 12 weeks. Additionally, 88% of patients with MR1+ status experienced reductions in BCR::ABL1 transcripts, a key marker of treatment efficacy in CML.
The safety profile of TERN-701 has been particularly encouraging. As of the latest data cut-off, no grade 3 or higher hematologic or non-hematologic treatment-related adverse events were reported. This favorable tolerability profile could potentially differentiate TERN-701 from existing CML treatments, which often cause significant side effects leading to treatment discontinuation.
Analysts note that TERN-701’s distinct chemical structure may contribute to its improved safety profile. The drug is not a clinically relevant inhibitor of CYP3A4 or OATB1/3, which allows for concomitant dosing with several relevant medications, potentially expanding its utility in clinical practice.
TERN-601: Targeting the Obesity Market
TERN-601 represents Terns Pharmaceuticals’ entry into the highly competitive but potentially lucrative obesity treatment market. The company is set to initiate a Phase 2 study (FALCON) in the second quarter of 2025, which will test various dosing schedules and aim to optimize titration dosing based on Phase 1 data.
The development of TERN-601 comes at a time of significant interest in oral GLP-1RAs for obesity treatment. Recent positive developments in the oral GLP-1 space, including promising Phase 3 results from competitors like Eli Lilly (NYSE:LLY)’s orforglipron, suggest potential for oral options to compete with injectable treatments.
Analysts highlight that TERN-601 has shown mean liver enzyme reduction across 28 patients in early studies, suggesting limited toxicity concerns compared to some competitors’ candidates. This could potentially position TERN-601 favorably in the market, especially given the recent discontinuation of Pfizer (NYSE:PFE)’s oral GLP-1RA due to safety concerns.
Financial Position
Terns Pharmaceuticals maintains a strong financial position to support its ongoing research and development efforts. As of March 31, 2025, the company reported cash and equivalents of $334.3 million. This substantial cash reserve is expected to fund operations into 2028, providing a significant runway for the company to advance its clinical programs. InvestingPro analysis shows the company holds more cash than debt and maintains an impressive current ratio of 30.89, though it’s currently burning through cash at a notable rate. Based on InvestingPro’s Fair Value analysis, the stock appears slightly undervalued at current levels.
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The company’s first-quarter operating expenses for 2025 were reported at $27.4 million, reflecting ongoing investments in its clinical pipeline. The appointment of Andrew Gengos as the new CFO in early 2025 is expected to bring additional financial expertise to guide the company through its next growth phase.
Market Outlook and Competition
The CML treatment landscape is evolving, with a growing need for efficacious and tolerable TKIs due to intolerance issues and sub-optimal responses with current treatments. TERN-701’s promising efficacy and safety profile position it as a potential key player in this market, particularly for patients who have failed or are intolerant to existing therapies. Notably, InvestingPro data shows TERN’s stock typically moves independently of the broader market with a beta of -0.19, potentially offering portfolio diversification benefits.
In the obesity market, the success of GLP-1RAs has sparked intense competition among pharmaceutical companies. The potential approval of oral GLP-1RAs could significantly expand the market, benefiting companies like Terns Pharmaceuticals that are developing such treatments. However, the company faces stiff competition from established players like Eli Lilly and Novo Nordisk (NYSE:NVO), as well as other emerging biotechnology firms.
Bear Case
How might competition impact TERN’s market position?
TERN faces significant competition in both the CML and obesity markets. In CML, established TKIs and emerging therapies from larger pharmaceutical companies could limit TERN-701’s market penetration. The obesity market is highly competitive, with major players like Eli Lilly and Novo Nordisk already having successful GLP-1RA products. TERN-601 will need to demonstrate clear advantages in efficacy, safety, or convenience to capture market share.
What are the risks associated with ongoing clinical trials?
As with all pharmaceutical companies, TERN faces inherent risks in its clinical development programs. Potential delays, unfavorable results, or safety concerns in upcoming trial updates could significantly impact the company’s stock price and future prospects. The need for pivotal trials and regulatory interactions to validate the efficacy and safety of both TERN-701 and TERN-601 presents ongoing challenges and uncertainties.
Bull Case
How could TERN-701’s safety profile differentiate it in the CML market?
TERN-701’s favorable safety profile, with no reported grade 3+ hematologic or non-hematologic treatment-related adverse events, could provide a significant advantage in the CML market. Many existing TKIs are associated with tolerability issues, leading to treatment discontinuation. If TERN-701 maintains its safety profile in larger trials, it could become a preferred option for patients who are intolerant to current therapies or require long-term treatment.
What potential does TERN-601 have in the growing obesity treatment market?
The obesity treatment market is expanding rapidly, with increasing acceptance of pharmacological interventions. TERN-601, as an oral GLP-1RA, could tap into the growing demand for convenient and effective weight loss treatments. The potential for improved tolerability compared to some competitors’ candidates could give TERN-601 an edge in this lucrative market. Success in this area could significantly boost TERN’s valuation and market position.
SWOT Analysis
Strengths:
- Promising efficacy data for TERN-701 in CML treatment
- Favorable safety profile of lead candidates
- Strong cash position with runway into 2028
- Potential in both oncology and metabolic disease markets
Weaknesses:
- Early-stage pipeline with key assets still in clinical development
- Dependence on positive outcomes from ongoing and future clinical trials
- Limited commercial experience as a clinical-stage company
Opportunities:
- Growing markets in CML and obesity treatments
- Increasing acceptance of oral therapies for weight management
- Potential for expansion into additional indications or combination therapies
Threats:
- Intense competition from established pharmaceutical companies
- Regulatory challenges and potential delays in drug approval process
- Rapid technological advancements in drug development
- Market saturation in target therapeutic areas
Analysts Targets
- Citizens Bank: $20.00 (Market Outperform) - June 17, 2025
- Citizens Bank: $20.00 (Market Outperform) - May 12, 2025
- Citizens Bank: $20.00 (Market Outperform) - April 21, 2025
- JMP Securities: $20.00 (Market Outperform) - February 26, 2025
- Citizens JMP Securities: $20.00 (Market Outperform) - December 4, 2024
Terns Pharmaceuticals presents an intriguing investment opportunity with its promising pipeline in CML and obesity treatment. While the company faces significant competition and clinical development risks, its innovative approach and strong financial position provide a solid foundation for potential growth. Investors should closely monitor upcoming clinical trial results and regulatory milestones, which will be critical in determining the company’s long-term success in the pharmaceutical industry.
This analysis is based on information available up to June 18, 2025.
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