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Leerink Partners has just begun covering Terns Pharmaceuticals (TERN), spotlighting early Phase 1 results for its CML candidate TERN-701 and the sizable market the firm sees for this program.
See our latest analysis for Terns Pharmaceuticals.
The Leerink coverage comes after a very strong run in the share price, with a 30 day share price return of 21.73% and a 90 day share price return of 53.00%. The 1 year total shareholder return is very large, suggesting momentum has been building as investors reassess both growth potential and risk around the CML and obesity pipelines.
If this CML news has you looking across the sector, it could be a good time to scan our list of 27 healthcare AI stocks as potential next ideas.
With Terns shares at US$42.12 and the average analyst price target at US$58.11, the market is clearly assigning value to TERN-701. The key question for investors is whether there is still mispricing or whether expectations for future growth are already fully reflected in the current valuation.
At a last close of $42.12 versus a fair value of $98.57 from the most followed narrative, Terns is framed as heavily discounted, with that view hinging on TERN-701’s long term commercial potential.
TERNs Pharmaceuticals (TERN) is fundamentally undervalued based on the clinical profile of its lead oncology asset, TERN-701. The latest data establish a clear trajectory for market leadership in Chronic Myeloid Leukemia (CML), justifying an intrinsic valuation target of 98.57 per share.
TERN-701: A Clinically Superior Drug Poised for Market Capture
The foundation of the $98.57 target is the compelling efficacy and safety seen in the Phase 1 CARDINAL trial:
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Global CML Market Size (Peak): The estimated size remains stable at $10 Billion.
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Peak Annual Sales (TERN-701): This is the core driver of the higher valuation. Based on achieving a 30% global market share (up from the previous 25% conservative estimate), the projected Peak Annual Sales for TERN-701 increase to $4.5 Billion. This capture is driven by its anticipated dominance in 2L/3L CML and its eventual entry into the massive 1L market.
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Probability of Success (PoS): The clinical data has significantly de-risked the program. The PoS is increased from 75% to a more confident 80%, reflecting the high likelihood of successful Phase 3 trials and regulatory approval.
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Net Present Value (NPV) Factor: The robust clinical de-risking and the clear blockbuster status ($1B in sales) warrant a higher valuation multiple. The Program Value is calculated using a 5.0x Peak Sales Multiple (up from 3 to 5).
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Best-in-Class Efficacy: TERN-701 delivered a cumulative 75% Major Molecular Response (MMR) by 24 weeks at the recommended Phase 2 doses. This rate is highly competitive, if not superior, to current standard-of-care treatments, demonstrating its potential to significantly deepen responses.
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The Refractory Solution: The drug showcased powerful activity even in the toughest third- and fourth-line patients, including those who failed prior treatments like Asciminib. This immediately establishes TERN-701 as the critical treatment option where others have failed.
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Safety Profile Allows Adoption: Crucially, the compound maintained a clean profile with no dose-limiting toxicities (DLTs) observed. A highly selective drug with high efficacy and superior tolerability addresses a major need in CML, a chronic condition requiring lifelong treatment.
