Terns Pharmaceuticals, Inc. (TERN) is a clinical-stage biopharmaceutical company developing a diverse portfolio of small-molecule product candidates to address serious diseases, including oncology and obesity. With a strong focus on innovation and a commitment to transforming patients' lives, Terns has emerged as a rising player in the dynamic biopharmaceutical industry.
Business Overview and History
Terns was incorporated as an exempted company in the Cayman Islands in December 2016 and later effected a domestication in the State of Delaware in December 2020, becoming a Delaware corporation. The company's operations are managed through its wholly-owned subsidiaries, Terns U.S. Opco and Terns Hong Kong, which oversee activities in the United States, China, and other global markets.
Since its inception, Terns has been dedicated to developing small-molecule product candidates that leverage mechanisms of action with proven potential in their target indications. The company's pipeline includes three lead programs – TERN-701, TERN-601, and TERN-501 – each addressing critical unmet needs in oncology and obesity.
In June 2019, Terns entered into an assignment agreement with Vintagence Biotechnology Ltd., acquiring worldwide rights to the Vintagence technology. This agreement required Terns to pay Vintagence up to CNY 205 million in development milestones for the first covered product. As of September 2024, Terns had paid Vintagence $4.4 million, including milestone payments.
In July 2020, Terns entered into an exclusive option and license agreement with Hansoh Healthtech and Jiangsu Hansoh Pharmaceutical Group Company. This agreement granted Hansoh an exclusive license to develop and commercialize Terns' compound TERN-701 in mainland China, Taiwan, Hong Kong and Macau. Hansoh exercised its option in November 2021, triggering a $1 million license fee payment to Terns.
In September 2022, Terns approved an amendment to its 2022 Employment Inducement Award Plan, increasing the number of authorized shares reserved for issuance. This plan allows the company to grant equity awards to newly hired employees as a material inducement to their acceptance of employment.
TERN-701, the company's lead oncology program, is a proprietary, oral, potent, and allosteric BCR-ABL inhibitor for the treatment of chronic myeloid leukemia (CML). Allosteric BCR-ABL inhibitors represent a novel class of therapy that has demonstrated superior efficacy and safety compared to traditional active-site tyrosine kinase inhibitors. TERN-701 is currently in a global Phase 1 CARDINAL trial, with initial data from the dose escalation cohorts expected in early December 2024.
In April 2024, Terns announced positive pharmacokinetic data from a Phase 1 healthy volunteer study for TERN-701, showing no clinically significant difference in exposure between fed and fasted dosing. This represents a key potential differentiator for TERN-701 within the allosteric BCR-ABL inhibitor class. Additionally, TERN-701 received Orphan Drug Designation for the treatment of CML in March 2024.
In the obesity space, Terns is advancing TERN-601, a small-molecule glucagon-like peptide-1 (GLP-1) receptor agonist, and TERN-501, a thyroid hormone receptor beta (THR-β) agonist. TERN-601 recently reported positive top-line results from a Phase 1 trial, showing dose-dependent, statistically significant placebo-adjusted mean weight loss of up to 4.9% in a 28-day multiple-ascending dose study. The data showed TERN-601 was well-tolerated, with 67% of participants losing 5% or more of their baseline body weight at the highest dose of 740 mg. Terns plans to initiate a Phase 2 FALCON study of TERN-601 in early 2025, with initial 12-week data expected in the second half of 2025.
Terns' third program, TERN-501, was previously developed for metabolic dysfunction-associated steatohepatitis (MASH). In August 2023, Terns announced positive top-line data from the Phase 2a DUET trial for TERN-501 in MASH. However, the company has decided to limit further investment in this indication due to the current regulatory and clinical development landscape. Nonetheless, the company continues to evaluate opportunities for TERN-501 in other metabolic diseases, including its potential in combination with GLP-1 receptor agonists for obesity, based on compelling preclinical data presented in June 2024.
Terns also has an ongoing discovery effort for the TERN-800 series of small-molecule glucose-dependent insulinotropic polypeptide receptor (GIPR) modulators for obesity, which the company believes have the potential to be combined with GLP-1 receptor agonists.
Financials and Liquidity
As of September 30, 2024, Terns reported cash, cash equivalents, and marketable securities of $372.8 million, including $172.7 million in net proceeds from an equity raise completed in September 2024. The company believes this cash position will provide a runway into 2028, supporting the advancement of its key clinical programs.
For the nine months ended September 30, 2024, Terns reported a net loss of $67.1 million, with research and development expenses of $52.1 million and general and administrative expenses of $23.8 million. The company's net cash used in operating activities during this period was $55.4 million.
For the fiscal year ended December 31, 2023, Terns reported no revenue, a net loss of $90.2 million, operating cash flow of -$67.4 million, and free cash flow of -$67.4 million. In the most recent quarter ended September 30, 2024, the company reported no revenue and a net loss of $22 million.
Terns' financial ratios reflect its clinical-stage status, with a current ratio of 32.99, a quick ratio of 32.99, and a cash ratio of 23.67. These robust liquidity metrics suggest the company is well-positioned to fund its ongoing and planned research and development activities. The company has no long-term debt, resulting in a debt-to-equity ratio of 0.00.
As of September 30, 2024, Terns had $270.1 million in cash and cash equivalents and $102.6 million in marketable securities. The company does not have any available credit lines.
Competitive Landscape and Risks
Terns operates in highly competitive therapeutic areas, facing competition from larger pharmaceutical and biotechnology companies, as well as other clinical-stage entities. In the oncology space, TERN-701 will compete with approved and investigational BCR-ABL inhibitors, including Novartis' Tasigna, Pfizer's Bosulif, and Ascentage Pharma's Olverembatinib.
In the obesity market, TERN-601 will need to differentiate itself from approved GLP-1 receptor agonists, such as Novo Nordisk's Wegovy and Eli Lilly's Mounjaro, as well as other emerging therapies. Additionally, the potential combination of TERN-501 with GLP-1 receptor agonists will need to demonstrate superior efficacy and safety compared to existing or pipeline combination treatments.
Terns also faces risks inherent to the biopharmaceutical industry, including the ability to successfully develop, obtain regulatory approval for, and commercialize its product candidates, as well as the potential for unexpected adverse events or competitive threats to emerge during clinical development or post-approval.
Recent Developments and Outlook
In September 2024, Terns strengthened its financial position by raising $172.7 million in net proceeds from an underwritten public offering. This capital infusion is expected to support the company's operations and the advancement of its key clinical programs.
The company has also made several important appointments to its leadership team and Board of Directors. In February 2025, Terns welcomed Andrew Gengos as its new Chief Financial Officer, bringing extensive financial leadership experience in the biotechnology industry. Additionally, the company appointed Robert Azelby and Heather Turner to its Board of Directors, further bolstering its strategic and operational expertise.
Looking ahead, Terns is poised to achieve several important milestones in the coming years. The company expects to report interim data from the initial dose escalation cohorts of the CARDINAL trial for TERN-701 in early December 2024, followed by the initiation of dose expansion in the first half of 2025 and additional efficacy data in the fourth quarter of 2025.
In the obesity space, Terns plans to initiate the Phase 2 FALCON study for TERN-601 in early 2025, with initial 12-week data expected in the second half of 2025. The company will also continue to explore opportunities for TERN-501 in combination with GLP-1 receptor agonists, leveraging its potential to deliver broader metabolic and liver benefits.
The biopharmaceutical industry, particularly in the areas of oncology and obesity, has seen a compound annual growth rate (CAGR) of approximately 8-10% over the past 5 years, indicating a favorable market environment for Terns' focus areas.
Management Changes and Retention Awards
Terns has undergone several management changes in recent years. In August 2023, former chief operating officer Bryan Yoon and former chief financial officer Mark Vignola received retention awards totaling $1.2 million. In July 2024, Mr. Yoon entered into a separation agreement and received severance of $0.5 million, the remaining unpaid portion of his retention award of $0.3 million, and a pro rata bonus. Dr. Vignola entered into a transition agreement and will receive severance of $0.5 million, the remaining unpaid portion of his retention award of $0.5 million, his 2024 bonus, and an additional retention bonus of $0.5 million.
In August 2023, former CEO Senthil Sundaram entered into a separation agreement and received severance of $0.6 million and his 2023 bonus of $0.3 million. Mr. Sundaram's equity awards were also fully accelerated.
In November 2023, former president and head of R&D Erin Quirk received a retention award of $0.6 million and a $0.1 million recognition bonus. In May 2024, Dr. Quirk entered into a separation agreement and received the remaining unpaid portion of her awards totaling $0.6 million. Her equity awards were also partially accelerated.
Conclusion
Terns Pharmaceuticals is navigating the competitive landscape in oncology and obesity with a focused and innovative approach. The company's lead programs, TERN-701 and TERN-601, have demonstrated promising clinical results and hold the potential to address significant unmet needs in their respective therapeutic areas.
With a strong financial position, a strengthened leadership team, and a pipeline of differentiated product candidates, Terns is well-positioned to continue its growth trajectory and create value for shareholders. As the company advances its clinical programs and explores strategic opportunities, investors will closely follow Terns' progress in transforming patients' lives through its innovative small-molecule therapeutics.