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

By Ciara Linnane

Terns plans to move to a Phase 2 trial and will submit the latest data to a coming scientific conference

Terns Pharmaceuticals Inc.'s stock soared 17% Monday after the company said an early stage trial of its obesity treatment in pill form achieved statistically significant weight loss of up to 5.5% over 28 days.

The Foster City, Calif.-based company (TERN) said the Phase 1 trial of its TERN-601 small-molecule GLP-1 receptor agonist - the class of drugs that includes Wegovy, Ozempic and Mounjaro, which have been approved in injectable form for diabetes or weight loss - was well tolerated in the trial, in which patients were offered multiple ascending doses.

TERN-601 "demonstrated dose-dependent, statistically significant placebo-adjusted mean weight loss across all three doses evaluated in the 28-day MAD study, with maximum placebo-adjusted mean weight loss of 4.9% (p<0.0001) at the highest dose of 740 mg [once a day]," the company said in a statement.

Some 67% of participants lost 5% or more of their baseline body weight at the top dose.

The results underscore the drug's potential to become a leading GLP-1 receptor agonist, based on the initial signs of efficacy, tolerability and manufacturing scalability, Chief Executive Amy Burroughs said.

"With operational preparations well under way, we look forward to swiftly advancing this promising product candidate into Phase 2 clinical development in 2025," she said in prepared remarks.

TERN-601 has distinct properties "that enable sustained target coverage and a flat decay curve, which allowed us to administer tolerable, high doses once per day in this trial," Burroughs said in a call with analysts.

"We believe the distinct properties of TERN-601 could lead to an even more differentiated profile in subsequent studies," she said, according to a FactSet transcript.

Chief Medical Officer Emil Kuriakose said the drug was well tolerated in the trial, with adverse gastrointestinal events consistent with the GLP-1 receptor agonist class and all being mild to moderate in severity.

"Importantly, TERN-601 had unremarkable safety findings with no clinically meaningful changes in liver enzymes, vital signs or ECGs at any dose," he said.

Kuriakose said the drug has four properties that are driving the clinical profile that shows the greatest success at the highest dose of 740 mg.

"The first two are low solubility and high gut permeability, which results in slow dissolution and prolonged absorption along the length of the gastrointestinal tract," he said.

That effect becomes more pronounced at higher doses, allowing for sustained 24-hour coverage. The third property is "substantially higher drug concentration and residence time in the gut tissue relative to plasma as we saw preclinically," he said.

Mizuho analysts, who rate the stock a buy, said the news was positive for the stock.

"With both timing and the data outcome in line with our expectations (and the reason we recently elevated [Terns] as our top pick for the month of September), we're very pleased with the totality of the data contained in [Terns's] press release, seeing in particular, no red flags," analysts Graig Suvannavejh and Avantika Joshi wrote in a note to clients.

Terns is widely viewed as a cheap entrant to the popular weight-loss-drug trend. The stock closed Friday at $7.81, giving the company a market cap of $591 million, compared with the $6 billion market cap of rival Viking Therapeutics Inc. (VKTX) and the roughly $878 billion market cap of one of the market leaders, Eli Lilly & Co. (LLY).

Viking is also developing an oral weight-loss drug, and data from that Phase 1 trial have been positive.

Analysts expect the approval of a pill as a weight-loss therapy to be a game changer, as it will allow patients to dose themselves at home without the burden of injection.

GLP stands for glucagon-like peptide. It works by mimicking the effects of a gut hormone that can help control blood-sugar levels and reduce appetite.

Terns is also expected to release data from a Phase 1 trial of its TERN-701 treatment for chronic myeloid leukemia, or CML, that won orphan-drug designation from the Food and Drug Administration in March, meaning the regulator believes it has promise.

Of the six analysts covering Terns's stock on FactSet, five rate it a buy and one rates it a hold.

The stock has gained 41% in the year to date, outperforming the S&P 500 , which has gained 14.7%.

-Ciara Linnane

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09-10-24 0736ET

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