Terns Pharma ends obesity drug program after mid-stage trial data

Terns Pharmaceuticals (TERN.O) is discontinuing the development of its experimental oral obesity drug, TERN-601, following mid-stage trial results that showed only modest weight loss of 4.6% and significant safety concerns, including gastrointestinal side effects and serious liver enzyme elevations. This decision, which caused Terns' shares to drop over 16% in extended trading, will redirect the company's focus to its lead cancer drug, TERN-701, with analysts noting the liver toxicity signal was anticipated given the drug's structural similarities to other discontinued GLP-1 agonists.

Analysis

Terns Pharmaceuticals (TERN.O) announced the discontinuation of its experimental oral obesity drug, TERN-601, following disappointing mid-stage trial results. The drug achieved only a modest 4.6% weight loss over 12 weeks compared to placebo, which the company deemed insufficient to justify further investment. This news led to a significant market reaction, with Terns' shares dropping over 16% in extended trading.

Beyond efficacy, the trial revealed significant safety concerns, including gastrointestinal issues leading to 11.9% participant discontinuation and serious liver enzyme elevations in three patients, two of which were drug-linked. William Blair analyst Andy Hsieh noted that the liver toxicity signal was anticipated due to TERN-601's structural similarity to Pfizer's (PFE.N) danuglipron and lotiglipron, both previously discontinued for similar liver safety issues. This suggests a known risk profile for this pharmacophore.

CEO Amy Burroughs confirmed that Terns will cease investment in metabolic disease, pivoting its focus entirely to its lead cancer drug, TERN-701, which targets chronic myeloid leukemia. This strategic shift underscores the company's re-prioritization of its pipeline following the TERN-601 setback. The company's future valuation will now be predominantly tied to the success of its oncology assets.

Key Decisions for Investors

• Investors should re-evaluate Terns' valuation model, shifting focus from its metabolic disease pipeline to the oncology asset TERN-701.
• Monitor upcoming clinical trial data for TERN-701 closely, as its success is now the primary driver for the company's future growth.
• Consider the implications of the company's strategic pivot away from a competitive GLP-1 market, assessing the potential for a more focused and efficient R&D pipeline.