10-Q: Terns Pharmaceuticals Reports Second Quarter 2024 Financial Results and Provides Business Update

Terns Pharmaceuticals reported a net loss of $22.7 million for the second quarter of 2024, while highlighting progress in its clinical programs and strategic focus on oncology and obesity.

Summary

• Terns Pharmaceuticals reported a net loss of $22.7 million for the three months ended June 30, 2024, compared to a net loss of $17.9 million for the same period in 2023.
• The company's research and development expenses increased to $18.4 million for the quarter, up from $14.2 million in the prior year, driven by increased clinical program expenses and personnel costs.
• General and administrative expenses were $7.2 million for the quarter, slightly up from $7.0 million in the same period last year.
• Terns' cash and cash equivalents totaled $91.5 million, and marketable securities were $133.8 million as of June 30, 2024.
• The company believes its current cash and cash equivalents will fund operations into 2026.
• The company is advancing its clinical programs, including TERN-701 for CML, TERN-601 for obesity, and evaluating opportunities for TERN-501 in metabolic diseases.
• Terns expects interim data from the CARDINAL trial for TERN-701 in December 2024 and top-line 28-day weight loss data for TERN-601 in September 2024.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While the company is making progress in its clinical programs and has a solid cash position, the increasing net loss and the need for additional funding are concerning. The sentiment is neutral to slightly negative.

Positives

• The company has a strong cash position of $225.3 million in cash, cash equivalents and marketable securities, which is expected to fund operations into 2026.
• TERN-701 showed promising pharmacokinetic data in a Phase 1 healthy volunteer study, with no clinically significant difference in exposure between fed and fasted dosing.
• The company is progressing its TERN-601 program with a Phase 1 trial underway and expects to report top-line 28-day weight loss data in September 2024.
• Preclinical data supports the potential of TERN-501 in combination with a GLP-1R agonist for obesity.
• TERN-701 received Orphan Drug Designation for the treatment of CML.

Negatives

• The company reported a net loss of $22.7 million for the second quarter of 2024, an increase from the $17.9 million loss in the same period of 2023.
• Research and development expenses increased significantly, driven by clinical program expenses and personnel costs.
• The company has not generated any revenue from product sales and does not expect to do so in the near future.
• The company is still reliant on additional financing to achieve its business objectives.

Risks

• The company is incurring significant operating losses and negative cash flows from operations.
• The company will need substantial additional funding to support its operating activities.
• Clinical trials are time-consuming, expensive, and uncertain, and the company may not obtain marketing approval for its product candidates.
• The company's product candidates, if approved, may not achieve commercial success.
• The company is subject to risks related to its reliance on third parties for research, development, and manufacturing.

Future Outlook

The company believes its existing cash and cash equivalents will be sufficient to fund its planned operating expenses and capital expenditure requirements into 2026, including key clinical data readouts from its lead programs in CML and obesity. The company expects to report interim data from the CARDINAL trial for TERN-701 in December 2024 and top-line 28-day weight loss data for TERN-601 in September 2024.

Management Comments

• The company is prioritizing its discovery efforts towards nominating a GIPR antagonist development candidate based on in-house discoveries.
• The company has decided to limit spend in MASH given the current regulatory and clinical development requirements for the indication.
• The company continues to evaluate opportunities for TERN-501 in metabolic diseases.

Industry Context

The company is operating in the competitive biopharmaceutical industry, focusing on developing treatments for oncology and obesity. The company's focus on novel mechanisms of action, such as allosteric BCR-ABL inhibitors and GLP-1 receptor agonists, aligns with current trends in drug development. The company's decision to limit spend in MASH reflects the challenges and regulatory hurdles in that area, while the focus on GIPR modulators for obesity is a growing area of interest in the industry.

Comparison to Industry Standards

• Terns' cash burn rate is typical for a clinical-stage biotech company, with R&D expenses being a significant portion of their operating costs, similar to companies like Madrigal Pharmaceuticals and Viking Therapeutics in the MASH space.
• The company's focus on oral GLP-1 agonists for obesity is in line with the industry trend, with companies like Eli Lilly and Novo Nordisk leading the way with injectable versions, and others like Structure Therapeutics and Zealand Pharma developing oral alternatives.
• The development of allosteric BCR-ABL inhibitors for CML is a novel approach, with Terns' TERN-701 potentially competing with existing tyrosine kinase inhibitors (TKIs) from companies like Novartis and Bristol Myers Squibb.
• The company's preclinical data on TERN-501 in combination with GLP-1R agonists is similar to the approach taken by other companies exploring combination therapies for obesity and metabolic diseases.
• The company's cash runway into 2026 is comparable to other companies of similar size and stage, but the need for additional funding is a common challenge in the biotech industry.

Management Changes

Stakeholder Impact

• Shareholders may be concerned about the increasing net loss and the need for additional funding.
• Employees may be affected by the management changes and the company's strategic decisions.
• Customers and suppliers may be impacted by the company's progress in its clinical programs and its financial stability.
• Creditors may be concerned about the company's ability to repay its debts.

Next Steps

• The company will continue enrollment in the global Phase 1 CARDINAL trial for TERN-701.
• The company will report top-line 28-day weight loss data for TERN-601 in September 2024.
• The company will prepare for a 12-week, Phase 2a clinical trial for TERN-601 for obesity.
• The company will continue to evaluate opportunities for TERN-501 in metabolic diseases.
• The company will prioritize its discovery efforts towards nominating a GIPR antagonist development candidate.

Key Dates

Keywords

Terns Pharmaceuticals, clinical-stage, biopharmaceutical, oncology, obesity, TERN-701, TERN-601, TERN-501, BCR-ABL inhibitor, GLP-1 receptor agonist, MASH, GIPR modulator, clinical trials, financial results