10-Q: Terns Pharma Advances Key Programs, Extends Cash Runway

Terns Pharmaceuticals reports positive clinical data for its lead oncology and obesity programs, extending its cash runway into 2028 while strategically seeking partnerships for metabolic assets.

Summary

• Terns Pharmaceuticals is a clinical-stage biopharmaceutical company focused on small-molecule product candidates for oncology and obesity.
• The company reported a net loss of $48.0 million for the six months ended June 30, 2025, compared to $45.1 million for the same period in 2024.
• Research and development expenses increased to $39.1 million for the six months ended June 30, 2025, up from $36.9 million in the prior year, driven by increased clinical and preclinical program expenses for TERN-701 and TERN-601.
• General and administrative expenses increased to $15.7 million for the six months ended June 30, 2025, from $14.0 million in 2024.
• Cash and cash equivalents, along with marketable securities, totaled $315.4 million as of June 30, 2025, down from $358.2 million at December 31, 2024.
• Net cash used in operating activities was $43.3 million for the six months ended June 30, 2025, an increase from $39.0 million in the same period of 2024.
• The company's existing cash and cash equivalents are expected to fund planned operating expenses and capital expenditure requirements into 2028.
• Positive early data from the Phase 1 CARDINAL study of TERN-701 (CML) showed compelling molecular responses and an encouraging safety profile.
• Positive Phase 1 results for TERN-601 (obesity) demonstrated dose-dependent, statistically significant placebo-adjusted mean weight loss of up to 4.9% and favorable safety/tolerability.
• The company is seeking strategic partners for TERN-601, TERN-501, and the TERN-800 series programs to focus capital resources on the TERN-701 program.

Sentiment

Score: 7

Explanation: The company shows strong clinical progress with positive data for its lead programs and has secured a solid cash runway into 2028. While losses are increasing, this is typical for a clinical-stage biotech. The strategic decision to seek partnerships for metabolic programs is a prudent approach to capital allocation, focusing internal resources on the most advanced oncology asset. External risks related to regulatory and trade environments are noted but are broad industry concerns.

Positives

• TERN-701 (CML) Phase 1 CARDINAL study showed positive early data with compelling molecular responses and an encouraging safety profile, with no dose limiting toxicities or treatment discontinuations.
• TERN-601 (obesity) Phase 1 study demonstrated significant weight loss (up to 5.5% over 28 days) and favorable safety and tolerability, with 67% of participants losing 5% or more of baseline body weight at the highest dose.
• The company's cash, cash equivalents, and marketable securities of $315.4 million as of June 30, 2025, are projected to fund operations into 2028, providing a strong financial runway.
• FDA granted Orphan Drug Designation for TERN-701 for the treatment of CML in March 2024.
• Preclinical data supports TERN-501 as a potential combination partner for GLP-1R agonists in obesity, showing greater weight loss and preservation of lean mass.

Negatives

• Net loss increased to $48.0 million for the six months ended June 30, 2025, compared to $45.1 million for the same period in 2024.
• Net cash used in operating activities increased to $43.3 million for the six months ended June 30, 2025, indicating a higher cash burn rate.
• The company does not intend to advance TERN-601 beyond Phase 2 development on its own, indicating a reliance on external partnerships for further commercialization.
• Accumulated deficit increased to $469.5 million as of June 30, 2025, reflecting ongoing operating losses.

Risks

• Disruptions at the FDA and other government agencies due to funding cuts, personnel losses, regulatory reform, and government shutdowns could hinder the ability to obtain guidance and secure timely approval of product candidates.
• The FDA's workforce is expected to decrease by 3,500 full-time employees out of approximately 20,000, potentially leading to delays in regulatory reviews.
• Changes in U.S. trade policy, including tariffs (e.g., 10% baseline reciprocal tariff, additional 20% on China, 25% on Canada/Mexico for non-USMCA goods), could negatively impact costs of materials, production processes, and supply chain.
• Uncertainty surrounding international trade could result in a disadvantageous research and manufacturing environment in China for U.S.-based companies.
• Changes in tax laws, such as the Inflation Reduction Act (IRA) and the One Big Beautiful Bill Act (OBBBA), could adversely affect the company's business and financial condition, including potential impacts on effective tax rate and cash tax obligations.
• The development and commercialization of obesity therapeutics is highly competitive, making it challenging to establish favorable collaboration or licensing arrangements for metabolic programs.

Future Outlook

The company expects to incur significant expenses and operating losses for the foreseeable future as it advances preclinical and clinical development of its product candidates. Research and development and general and administrative costs are expected to remain significant. The company anticipates needing substantial additional funding beyond its current cash runway into 2028, which may be obtained through equity or debt financings, collaborations, or licensing arrangements. Future capital requirements depend on factors such as the scope and progress of clinical trials, regulatory review outcomes, ability to establish collaborations, intellectual property costs, and manufacturing arrangements.

Management Comments

• We are advancing multiple drug candidates we believe have the potential to deliver improved clinical outcomes in the target indication as either single-agent or combination therapies.
• We do not intend to advance TERN-601 on our own beyond this stage of development given the expected time and cost to complete pivotal clinical trials and the large sales and marketing organization required to effectively commercialize a therapeutic for obesity.
• We plan to focus our capital resources on continuing to advance the TERN-701 program in CML while exploring opportunities for a potential collaboration, out license arrangement or other strategic partnership for TERN-601.
• We continue to evaluate opportunities for TERN-501 in metabolic diseases.
• We are prioritizing our discovery efforts towards nominating a GIPR antagonist development candidate based on in-house discoveries and growing specific scientific rationale supporting the potential of GLP-1 receptor agonist and GIPR antagonist combinations for obesity.
• We are seeking a strategic partner to advance the TERN-501 program.
• We are seeking a strategic partner to advance the TERN-800 series program.
• We believe that our existing cash and cash equivalents will be sufficient to fund our planned operating expenses and capital expenditure requirements into 2028, including key clinical data readouts from our lead programs in CML and obesity.

Industry Context

The company operates in the highly competitive biopharmaceutical industry, specifically targeting oncology (Chronic Myeloid Leukemia) and metabolic diseases (obesity, MASH). Its GLP-1 receptor agonist (TERN-601) and GIPR modulators (TERN-800 series) are in a rapidly evolving and competitive obesity market, where numerous product candidates are in development. The strategic decision to seek partnerships for metabolic programs reflects the significant capital and commercialization infrastructure required to compete in this space, allowing the company to focus its internal resources on the CML program (TERN-701). The preclinical data supporting TERN-501 as a combination therapy for GLP-1R agonists aligns with a broader industry trend towards multi-modal approaches for complex metabolic disorders.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Legal Proceedings

• As of June 30, 2025, the company was not a party to any pending material litigation or other material legal proceedings that are probable to have a material adverse effect on its business.

Related Party Transactions

• NA

Stakeholder Impact

• Shareholders: Potential for long-term value creation from positive clinical trial outcomes and strategic partnerships, but also risk of dilution from future capital raises.
• Employees: Ongoing stock-based compensation plans and recent executive leadership transitions may impact morale and stability.
• Customers/Patients: Advancement of product candidates offers potential new therapeutic options for serious diseases like CML and obesity.
• Creditors: Strong cash position and extended runway reduce immediate financial risk to creditors.
• Partners: The company is actively seeking strategic partners for its metabolic programs, indicating potential for new collaborations and shared development risks/rewards.

Next Steps

• Continue optional backfill dosing of new participants in existing cohorts of the TERN-701 CARDINAL study dose escalation.
• Enroll 40 patients at each dose level (320 mg and 500 mg QD) in the dose expansion portion of the TERN-701 CARDINAL study.
• Release additional safety and efficacy data for TERN-701 in the fourth quarter of 2025, anticipated to include a larger cohort of patients with longer treatment durations.
• Anticipate top-line 12-week data from the Phase 2 FALCON clinical trial of TERN-601 early in the fourth quarter of 2025.
• Explore opportunities for a potential collaboration, out-license arrangement, or other strategic partnership for TERN-601 beyond Phase 2 development.
• Continue to evaluate opportunities for TERN-501 in metabolic diseases and seek a strategic partner for its advancement.
• Prioritize discovery efforts towards nominating a GIPR antagonist development candidate for the TERN-800 series and seek a strategic partner for this program.

Key Dates

Recommendation

The company reported positive clinical data for its lead oncology candidate TERN-701 and its obesity candidate TERN-601, with TERN-701 showing compelling molecular responses and TERN-601 demonstrating significant weight loss and favorable tolerability. The company has extended its cash runway into 2028, providing financial stability for ongoing clinical trials. While net losses increased, this is typical for a clinical-stage biopharmaceutical company advancing its pipeline. The strategic decision to seek partnerships for metabolic programs (TERN-601, TERN-501, TERN-800 series) allows for focused capital allocation on the CML program (TERN-701) while potentially unlocking value from other assets. These factors suggest a positive outlook for long-term investors.

Keywords

Biopharmaceutical, Oncology, Obesity, Chronic Myeloid Leukemia, CML, GLP-1 receptor agonist, THR-beta agonist, GIPR modulators, Clinical-stage, Drug development, TERN-701, TERN-601, TERN-501, TERN-800 series, SEC filing, 10-Q, Clinical trials, Biotech