Valued at a market cap of $347 million, Terns Pharmaceuticals (TERN) is a clinical-stage biopharma company that develops small-molecule product candidates for the treatment of oncology, metabolic dysfunction-associated steatohepatitis, and obesity. Terns is developing a portfolio of products to address serious diseases, including oncology and obesity - the latter of which has sparked some serious interest in the stock lately.

Shares of Terns Pharmaceuticals went public in early 2021, and currently trade over 81% below all-time highs, allowing you to buy the dip. Let’s see if you should hold Terns Pharmaceuticals in your equity portfolio right now. 

The Bull Case for Terns Stock

Terns Pharmaceuticals is advancing towards initial data readouts from its Phase 1 clinical programs for TERN-601, its oral small molecule GLP-1 agonist for obesity, and TERN-701, its allosteric BCR-ABL inhibitor for CML. 

Management emphasized that the global Phase 1 trial of TERN-701 allows for the enrollment of second-line CML patients - making the study attractive for patients, given that no allosteric inhibitor is approved for 2L CML patients. 

During its Q4 earnings call, company CEO Amy Burroughs stated, “Terns made meaningful progress throughout 2023, as highlighted by the initiation of these two clinical programs, the positive Phase 2 data readout from our potentially best-in-class THR-β and the advances in discovery for our small-molecule GIPR modulators for obesity.”

Separately, Morgan Stanley has projected that the global weight-loss drug market could reach over $77 billion by 2030, providing Terns with enough room to grow its top line once its drug is approved. 

Mizuho Is Bullish on TERN Stock

Last month, Terns Pharmaceuticals stock rose over 6% in a single trading session after an analyst issued a bullish comment on its drug pipeline, including that oral treatment for weight loss. 

According to Marketwatch, Mizuho said that positive trial data from Viking Therapeutics (VKTX) for its Phase 1 trial of VK2735, an oral weight loss drug, is also good news for Terns. With the Viking drug safe and well-tolerated, Mizuho thinks the market will reward TERN for similarly upbeat results. Management at Tern believes its clinical stage oral drug can reduce an individual’s body weight between 3% and 5% over a four-week period, potentially yielding even better results than the 3.3% loss recorded by Viking. 

The market for an oral weight-loss pill is expected to be much larger than for injections, such as those offered by Eli Lilly (LLY) and Novo Nordisk (NVO), making stocks such as TERN and VKTX top investment choices right now. Phase 1 Trial data from TERN is due out in the second half.

“Given a current market cap of ~$400 million (especially in light of VKTX’s current $8.7 billion market cap), we see TERN as an attractively valued way for investors to play the obesity market,” wrote Mizuho in their late-March bull note.

Is TERN Stock a Good Buy Right Now?

Terns Pharmaceutical ended 2023 with $263 million in cash, compared to $283 million in 2022. Based on its current operating plan, it has enough liquidity to support operations into 2026. 

The company’s research and development expenses rose to $63.5 million in 2023, up from $39.6 million in 2022. Comparatively, net losses totaled $90.2 million in 2023, up from $60.3 million in 2022.

Out of the nine analysts covering TERN stock, seven recommend “strong buy” and two recommend “hold.” The average target price for TERN is $14.21, over 165% higher than the current trading price. 

Clinical-stage biopharma companies are a high-risk, high-reward bet, as share prices can deliver substantial returns - though generally, only if and when a particular drug is approved. As such, investors intrigued by the potential upside in TERN should proceed with caution and begin with a small stake.