MW Terns's stock soars as analysts cheer leukemia data - and predict more gains

By Ciara Linnane

The pharma company now has two positive proof-of-concept trials under its belt, including its weight-loss pill

Terns Pharmaceuticals Inc.'s stock was soaring 14% Wednesday, as analysts cheered positive data released a day earlier on a treatment for chronic myeloid leukemia.

The data from an early-stage trial of TERN-701 were very encouraging, according to Mizuho analysts Graig Suvannavejh and Avantika Joshi.

"In particular, they appear supportive of a potential best-in-class profile for '701 from both an efficacy and safety/tolerability perspective - especially when compared against Novartis' Scemblix/asciminib, also a 3G allosteric TKI which in a relatively short time has emerged as a new standard of care in the treatment of CML," the analysts wrote in a note to clients.

Mizuho is sticking with its outperform rating on Tern's stock $(TERN.UK)$, the equivalent of buy. The company is also developing a weight-loss drug in pill form that many analysts view as very promising.

While many have been backing Tern more for that drug, the CML market "is long-established [and] now a roughly $5 billion market," said the note.

Yet despite the availability of drugs like Scemblix and that treatment's promising commercial start since it was approved in 2021, "there remains the need to improve on efficacy, safety, tolerability and ease of use for patients who can be on life-long therapy," the analysts wrote.

Mizuho is modeling use of TERN-701 as a second-line treatment for CML and expects peak risk-unadjusted sales of $2.5 billion in the U.S. and $1.2 billion in the five major European markets - France, Germany, Italy, Spain and the U.K. - assuming a 50% possibility of success and potential U.S. launch in 2030.

"That said, should TERN pursue a first-line label for '701 (which we believe is very possible, based on yesterday's data - and assuming TERN does indeed follow this path), this would provide upside to our current estimates," they wrote.

UBS analysts, who also have a buy rating on the stock, agreed. The data "look encouraging and potentially better than expectations," wrote the analysts, led by Eliana Merle, in a note to clients.

There were no dose-limiting toxicities and a high major molecular response rate - 50% at three months, said the UBS note. Molecular response is one of the ways that doctors monitor the effectiveness of a CML treatment.

As of Oct. 28, Terns had 15 patients enrolled in the trial across three dose levels of 160, 320 and 400 milligrams dosed once daily for three months. Around 88% showed decreases in BCR-ABL, an abnormal protein found in most CML cases.

"We think importantly some of these responses were seen in patients post-asciminib/Scemblix," the analysts wrote. UBS views tolerability as key, as it's the main reason for CML patients switching treatments.

UBS also views Terns's obesity drug favorably despite an increasingly competitive field.

Obesity "is a very large market and TERN's early 28-day weight loss looks comparable to others in the space," said the UBS note. With now two promising proof-of-concept trials under its belt, "we think TERN is undervalued," the note added.

Oppenheimer, which also rates the stock at outperform, agreed and said TERN-701 is also "an underappreciated asset" based on the data.

Oppenheimer analysts, led by Jay Olson, said the data support development in earlier-line settings, "and its three-month performance strengthens our optimism surrounding longer-term MMR data," which is expected in the fourth quarter of 2025 following dose expansion in the first half of the year.

The investment bank raised its price target on Terns's stock by 18%, to $20. "Based on our discounted cash-flow valuation of TERN, we believe that its shares remain underappreciated," it said.

Terns's stock has gained nearly 12% in the year to date, while the SPDR S&P Biotech ETF XBI has gained roughly 11% and the S&P 500 SPX has gained around 27%.

Read: Terns Pharmaceuticals' stock soars 17% after biotech posts positive results in trial of weight-loss drug in pill form

-Ciara Linnane

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December 04, 2024 13:19 ET (18:19 GMT)

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